There’s been record demand for federal Series I savings bonds, an inflation-protected and nearly risk-free asset, offering an eye-popping 9.62% annual return through October.
However, it’s not easy to buy I bonds through TreasuryDirect, a 20-year-old platform run by the U.S. Department of the Treasury, financial advisors say.
“It’s like going to the DMV online,” said Matt Stephens, a certified financial planner with AdvicePoint in Wilmington, North Carolina, explaining how the process of buying I bonds is especially difficult for his older clients.
Inflation is driving up demand for I bonds
I bond interest has two parts, a fixed rate and variable rate, adjusting every six months based on the Consumer Price Index, a key measure of inflation.
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Since the annual rate jumped to 7.12% in November, 1.85 million new savings bond accounts have been opened through June 24, according to a Treasury official.
“We’re committed to ensuring that TreasuryDirect users have a positive customer experience,” a Treasury spokesperson said, highlighting recent changes, such as shifted resources, hiring temporary staff and website and phone support improvements.
“We are also in the process of developing an updated, modern replacement for the current TreasuryDirect system,” they added.
How to purchase I bonds
There are two ways to buy I bonds. You can buy them electronically via TreasuryDirect, with an individual limit of $10,000 per person per calendar year. You can also buy them in paper form with your federal tax refund, enabling another $5,000 purchase per person.
Before buying electronic I bonds, you’ll need to open a TreasuryDirect account by providing your tax ID number, email address and banking details.
However, you’ll want to keep your account number and password safe, as multiple failed attempts may lock your account. This requires a call to customer service, which is currently experiencing “higher than usual call volume,” according to the website.
Another possible hiccup: You can’t rely on some password managers to autofill your credentials since part of the login requires you to type the password on a virtual keyboard with your cursor.
Some accounts need additional identity verification
Tommy Blackburn, a Richmond, Virginia-based CFP and senior financial planner at Mason and Associates who frequently helps clients purchase I bonds, said one of the main pain points is additional identity verification.
It can be very difficult obtaining the signature guarantee from major financial institutions and local ones.Tommy Blackburnsenior financial planner at Mason and Associates
In some cases, investors must fill out an account authorization form to prevent fraud, according to a Treasury official. This requires signing the form at a bank or credit union, notated with a “signature guarantee,” before mailing it back.
“In our experience, it can be very difficult obtaining the signature guarantee from major financial institutions and local ones,” Blackburn said. However, a Treasury official said they are working to expand certification to any notary public.
There are extra steps to change bank account details
There’s a similar process for updating banking details for TreasuryDirect, requiring a bank change request form, explained Ken Tumin, founder and editor of DepositAccounts.com, who recently went through the process.
When opening a TreasuryDirect account, “you definitely want to choose a bank account that you plan to maintain and keep long-term,” Tumin suggested.
I bonds aren’t right for all investors
While the current I bond rate may be appealing, it’s important to consider whether these assets align with your goals before purchasing, experts say.
There are relatively low purchase limits, with a few exceptions, and no access to the funds for one year, making it suitable as a “supplement to your emergency fund,” Stephens said.