New return on Series I Savings Bonds set at 3.06%

Portion of savings bond

The return on Series I Savings Bonds bought over the next six months was officially set at 3.06% today.

With even the best 5-year CDs paying just over 2%, these bonds have become one of the best risk-free places to put your money.

But this isn't a place where you can stash lots of cash, because the government has placed such severe restrictions on much savers can invest, limiting each individual to $10,000 this year.

The total return is calculated by adding the inflation rate, which changes every six months, to a fixed rate that is established when your bond was purchased and does not change for as long as you own the bond.

Although the fixed rate has been as high as 3.6%, it was lowered to 0% last November and the Treasury Department announced today that it would remain there for bonds purchased between Nov. 1, 2011, and April 30, 2012.

The inflation rate is based on the Consumer Price Index.

The annualized inflation rate between March and September was 3.06%, so that is what everyone who buys a new Series I Bond will earn for the first six months.

That is down from the 4.6% they paid between May 1 and Oct. 31.

But you're only allowed to buy $5,000 worth of Series I Bonds online at and another $5,000 worth of paper I Bonds at banks.

On Jan. 1, 2012, the government will stop selling paper I Bonds through banks and that option will go away.

If you redeem these savings bonds within the first five years, you'll forfeit the three most recent months' worth of interest. After 5 years, there is no early withdrawal penalty.

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