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Building an I Bond Ladder


If you have stepped out of your house lately to buy anything, you are probably aware of the crazy price increase in everything. From gas to groceries, nothing has been spared. 


The current inflation rate is sitting at about 8%. 


This means any cash that has been sitting in my checking/savings account has less purchasing power. So I have essentially lost 8% of value on the cash sitting in my bank account. This is a big mistake that I should have looked into fixing months ago. I believe I have found the solution to my situation.  


I Bonds


Series I Bonds ( I Bonds) are bonds that are issued by the U.S Department of the Treasury and are considered one of the safest investments that help protect your money from inflation.. Some keys things about I Bonds:


  1. Yield adjusted with inflation

  2. Can purchase $10,000/year electronically and $5000/year via tax refund. So an individual can purchase $15,000/year

  3. Must hold for 1 Year

  4. No state or local taxes


I actually heard about I Bonds in the past but it was never something I looked because:


  1. Inflation was never something I had to worry about.

  2. I didn’t have any extra money laying around.  


Given the current inflation rate and I actually have money to invest, I am really looking into putting a sizable amount of my liquid cash into I Bonds. I actually want to build an I Bond ladder with my current emergency. I currently have about 6 months of living expenses in a savings account earning about 2%. I bonds are currently yielding 6.89%. 


The only drawback in keeping an emergency fund in I Bonds is that it’s not liquid for 1 year. So what I plan on doing is just transferring about $833.33 per month into I Bonds until all of my emergency fund is converted to I Bonds.


I am actually not too worried about having my emergency fund tied up for one year due to several reasons. 

  1. I have a stable job that is currently in high demand. I don’t foresee any type of layoff anytime in the near future. Also, if I were to be laid off, there are lots of jobs out there in my current field. 

  2. My wife also has a stable job. We are able to live off one income if needed.

  3. I have access to loans from my 401k.

  4. I have access to my Roth IRA. Any contributions made to Roth IRAs can be withdrawn tax free. 

Due to the above reasons, I don’t feel like I would be in too much of a bind even if I don’t have access to my emergency. That’s the great thing about trying to poverty FIRE. I don’t need much and I am learning to be more adaptable. 


Another benefit I see about holding I Bonds is the fact that after 1 year, it’s like having cash in hand that will not “lose value”. As I prepare to FIRE, I would like to have a larger portion of my net worth in liquid funds to help with the psychological side of retiring early. I do not want market fluctuations to be a reason for me to delay early retirement. 


Setting up a Treasury Direct account was easy and took me less than 15 minutes.

I was able to buy I Bonds through Treasury Direct. 

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