I-Bond vs TIPS Comparison Calculator
Both I-Bonds and TIPS protect against inflation, but the mechanics differ. I-Bonds have $10K/year purchase limits, 12-month lockup, 5-year early redemption penalty. TIPS have no purchase limit, full market liquidity, but principal can drop with deflation. Compare both for your situation.
Series I Bonds: The Basics
I-Bonds are issued by the US Treasury directly to individuals. They pay a fixed rate (set at purchase, held for life of bond) plus a variable inflation rate (reset semi-annually based on CPI-U). $10,000/year purchase limit per Social Security number. 1-year minimum hold. Forfeit last 3 months of interest if redeemed before year 5. Tax-deferred until redemption.
TIPS: Treasury Inflation-Protected Securities
TIPS are marketable Treasury bonds whose principal adjusts with CPI. The coupon is paid on the inflation-adjusted principal. Available in 5, 10, and 30-year maturities. No purchase limit. Full secondary market liquidity. Principal can decrease during deflation. Annual interest taxed federally (not state), and inflation accruals are taxable annually even though not received — hold in tax-advantaged accounts.
When To Choose Each
I-Bonds: emergency fund layer beyond 1-year cash, tax-deferral value, sub-$10K/year purchases, simplicity. TIPS: larger investments, retirement income laddering, hold in IRA to avoid phantom income tax. Many investors hold both — I-Bonds for small allocations, TIPS for larger inflation-protected ladders.
Source: TreasuryDirect.gov I-Bond and TIPS rate pages, IRS Publication 550 on bond taxation, Wade Pfau retirement income research. Last updated: May 2026.