I Bond vs TIPS Comparison Calculator

I Bonds vs TIPS — Different Designs, Same Goal

Both Series I Savings Bonds and Treasury Inflation-Protected Securities are US-government instruments designed to protect purchasing power against inflation. They achieve this differently. I Bonds earn a composite rate = fixed rate + 2× semiannual inflation rate (CPI-U), reset every six months and adjusted to the current rate over time. TIPS pay a fixed real coupon on a principal that adjusts up (or down) with CPI-U; principal is repaid at maturity at the higher of original or inflation-adjusted value (source: TreasuryDirect, TIPS docs).

Key Differences — 2026 Decision Matrix

Liquidity: I Bonds cannot be cashed in the first 12 months. After 12 months, redeem any time but lose 3 months interest if redeemed before 5 years. TIPS trade on the secondary market — sell any time at market price (which can be lower than purchase if real yields rose). Limits: I Bonds limited to $10,000 electronic per person per year + $5,000 paper via tax refund. TIPS have no purchase limit, suitable for large amounts. Tax timing: I Bond interest tax-deferred until redemption (option to report annually). TIPS pay coupon plus inflation-adjusted principal as taxable "phantom income" each year — this is a real cash-flow issue in tax-deferred accounts vs taxable. Both are state-tax exempt, federal taxable. Education exclusion: I Bonds may be tax-free if used for qualified higher-education expenses (subject to MAGI limits). TIPS do not have this exclusion (source: IRS Publication 970).

2026 Yield Environment

As of early 2026, I Bond fixed rate stands near 1.30% (set Nov 2025 reset) — meaning the locked-in real return on new purchases is 1.30% + inflation. 10-year TIPS real yields are approximately 2.10% — meaningfully higher than I Bond fixed rates. This makes TIPS more attractive for the real-yield component, though I Bonds still win on simplicity, no market-price volatility, and the $10K annual purchase limit caps your TIPS-style real return at higher rates than CDs or T-Bills with no inflation protection.

Breakeven Inflation Analysis

Breakeven inflation = the inflation rate at which I Bonds match TIPS after-tax. With current 2026 numbers (fixed 1.30% vs real 2.10% = 0.80% difference), TIPS beat I Bonds at any positive inflation rate purely on yield. But I Bond advantages — liquidity flexibility, education exclusion, no market-price risk, tax deferral — typically tilt the decision for retail investors with smaller amounts. Use I Bonds for emergency-fund-adjacent inflation hedging up to the $10K limit; use TIPS for larger inflation-protected fixed-income allocations in tax-deferred accounts.

Tax-Account Placement Matters

TIPS produce phantom income (taxable annually) — best held in IRA or 401(k) where the tax is deferred or eliminated. In a taxable account, TIPS phantom income drag can be significant in high-inflation years. I Bonds defer all tax until redemption — they work better in taxable accounts. Match the instrument to the account type: TIPS in tax-deferred, I Bonds in taxable, for optimal after-tax returns over a long holding period. See our I Bond rate calculator, RMD calculator, muni bond tax-equivalent yield, and capital loss carryover.

Last updated April 2026. Estimates only — verify current rates at TreasuryDirect.gov. I Bond fixed rate set every May and November; TIPS real yields set at auction each cycle. Sources: TreasuryDirect, Federal Reserve, BLS CPI.