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Neither Series I Savings Bonds nor Treasury Inflation-Protected Securities (TIPS) is always the better inflation hedge. I Bonds are generally the simpler choice for money you can lock up for at least a year, especially if you value a stable TreasuryDirect account value and the ability to defer federal tax on interest. TIPS are generally more flexible for investors who want five-, 10-, or 30-year maturities, semiannual payments, larger purchases, or the option to sell before maturity. The right comparison is an I Bond’s fixed-rate component versus the current real yield on a TIPS maturity that matches your time horizon—not an I Bond composite rate versus a TIPS coupon.
This U.S.-specific comparison uses Treasury and IRS information checked November 12, 2026. Rates, purchase rules and tax guidance can change, so verify the live figures before buying.
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| Name | Best for | Key spec | Purchase and access | Checked |
|---|---|---|---|---|
| Series I Savings Bonds | Savers who can wait at least 12 months and prefer a nonmarket account value | 5.51% composite rate for bonds issued Nov. 1, 2026–Apr. 30, 2027, including a 1.40% fixed rate; inflation component resets semiannually | Buy electronically through TreasuryDirect; $10,000 annual electronic limit per Social Security number; no secondary market | Nov 2026 |
| TIPS | Investors who want marketability, periodic income or a maturity matched to a liability | Principal adjusts with CPI-U; fixed coupon paid every six months; 5-, 10- and 30-year maturities | Buy at Treasury auctions or through a financial institution, broker or dealer; $100 minimum in $100 increments; can sell before maturity | Nov 2026 |
Source: TreasuryDirect’s TIPS and I Bond comparison, I Bond rate table, and Treasury product pages.
What is the essential difference between I Bonds and TIPS?
I Bonds are savings bonds whose rate combines a fixed component with a semiannual inflation component. Interest accrues monthly, compounds every six months and is added to the bond’s value; you do not receive scheduled cash payments. The bond can earn for up to 30 years.
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TIPS are marketable Treasury securities. Treasury adjusts their principal for changes in the Consumer Price Index for All Urban Consumers (CPI-U), and a fixed coupon is paid every six months on that adjusted principal. The security’s market price can rise or fall before maturity as interest rates and real yields change.
At maturity, Treasury pays the inflation-adjusted principal or the original principal, whichever is greater. That floor applies at maturity, not to the price you would receive if you sold a TIPS early.
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How does the current I Bond rate work?
Treasury lists a 5.51% composite rate for I Bonds issued from November 1, 2026, through April 30, 2027. The quoted rate includes a 1.40% fixed rate. The composite rate applies for the first six months after an issue date; the inflation component then changes every six months. The 1.40% fixed component stays with that bond for its life.
The 5.51% figure is therefore a dated snapshot, not a promise that the bond will earn 5.51% every year for 30 years. Future composite rates depend on CPI-U changes and the fixed-rate terms attached to the issue. Treasury resets the inflation component each May and November.
For a purchase decision, note the fixed rate separately from the headline composite rate. A buyer locking in a higher fixed component keeps that component even if later inflation readings are lower. Conversely, a high current composite rate can decline when the next inflation reset is calculated.
See Treasury’s current I Bond rate page for the applicable issue window and reset schedule.
How do TIPS protect against inflation?
Treasury increases or decreases TIPS principal with CPI-U. The fixed coupon rate is applied to that changing principal, so the dollar amount of a coupon payment can rise when inflation raises principal and can fall during a deflationary period. Payments are made every six months.
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A TIPS coupon is not the same thing as its expected return. The coupon is set when the security is issued, while the real yield reflects the coupon and the price paid at auction or in the secondary market. Buying above or below par changes the yield you actually lock in. For a current comparison, use Treasury’s daily par real-yield curve for a maturity close to your intended holding period. It is an estimate based on secondary-market quotations, not a guaranteed return for every individual TIPS purchase.
During deflation, principal can decline while the TIPS is outstanding. If held to maturity, however, Treasury pays at least the original principal. Selling before maturity exposes you to the then-current market price, which can be below your cost even when the inflation adjustment has been positive.
Can I sell an I Bond or TIPS early?
I Bonds cannot be sold in a secondary market. You cannot redeem one during the first 12 months. If you redeem after 12 months but before holding it for five years, you lose the most recent three months of interest. After five years, that penalty no longer applies, but redemption still occurs through the Treasury process rather than a market sale.
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TIPS can be sold before maturity through a broker or dealer in the secondary market. The sale price depends on real yields, nominal interest rates, inflation expectations, time remaining and market liquidity. A rise in comparable market yields generally pushes the price of an existing TIPS down; a fall in yields generally pushes it up. The ability to sell is useful, but it means the principal-protection feature at maturity does not protect an early sale.
Neither instrument should be treated as immediately accessible emergency cash. I Bonds have the 12-month lockout, while a TIPS sale can produce a loss at an inconvenient time.
Which has the better maturity for a savings goal?
I Bonds have a single 30-year maximum earning life, although you may redeem them earlier subject to the rules above. TIPS are issued with five-, 10- and 30-year maturities. That range lets you match a security’s maturity to a planned expense or liability.
For a goal expected in roughly five years, a five-year TIPS can reduce the need to sell in an unfavorable market. A 10- or 30-year TIPS may be appropriate for a longer liability, but its price can be more sensitive to changes in real yields if you need to sell early. An I Bond can remain useful for a long-term reserve, provided you can accept the purchase limit and lack of liquidity.
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Matching maturity does not eliminate risk: an I Bond’s future composite rates are unknown, and a TIPS held in a taxable account creates annual tax reporting even if you do not sell.
How are I Bonds and TIPS taxed?
Both securities are generally exempt from state and local income tax, but their federal tax timing differs substantially.
I Bond federal tax
For cash-method taxpayers (most individuals), I Bond interest is generally reported when the bond is redeemed, reaches final maturity or is otherwise disposed of. You may elect to report interest annually instead. Because I Bond interest is added to the bond rather than paid out, deferring the tax can preserve cash for compounding, but it also creates a larger tax bill when you eventually redeem.
Special rules can apply to qualified education uses and individual filing circumstances. The IRS explains the general treatment in Publication 550; check current eligibility requirements rather than assuming an education exclusion applies.
TIPS federal tax
Federal tax generally applies each year to TIPS coupon interest and to inflation adjustments that increase principal. The inflation adjustment is sometimes called “phantom income”: you can owe tax before receiving that principal in cash at maturity. A deflationary adjustment can reduce the amount subject to tax, subject to the applicable tax rules.
Taxable-account investors should keep records of annual adjustments and consult a qualified tax professional about basis and reporting. A tax-advantaged account can change the practical effect of these timing differences, but the correct treatment depends on the account type and your circumstances; do not assume that one account rule applies to all investors.
How much can I buy, and where?
Treasury limits electronic I Bond purchases to $10,000 per calendar year per Social Security number. Electronic purchases are made through TreasuryDirect. That cap can make I Bonds difficult to use for a large inflation-hedging allocation, although eligible ownership structures and paper-bond rules may have separate conditions that should be checked directly with Treasury.
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TIPS have a $100 minimum and are generally purchased in $100 increments. You can buy them at Treasury auctions or through a financial institution, broker or dealer. Treasury’s auction limits are substantially higher than the I Bond electronic limit. A broker may charge a transaction fee or apply its own minimums, so review the broker’s terms before placing an order.
The purchase channel also affects convenience. TreasuryDirect is designed for direct Treasury ownership, while a brokerage account can make it easier to sell TIPS, reinvest coupon payments or hold TIPS alongside other investments.
How should I compare an I Bond with a TIPS?
Use this sequence rather than comparing the two headline rates.
- Set the holding period. If you may need the money within 12 months, an I Bond is unavailable for that purpose. If the goal has a defined five-, 10- or 30-year date, identify the TIPS maturity nearest that date.
- Decide whether market liquidity is essential. Choose TIPS if the ability to sell before maturity is worth accepting price volatility. Choose I Bonds only if you can tolerate the lockout and redemption rules.
- Compare the correct rate measures. For an I Bond, examine the fixed component and understand that the inflation component resets. For TIPS, examine the real yield for the matching maturity and date. Do not compare the TIPS coupon directly with the I Bond composite rate.
- Model taxes. Estimate whether annual TIPS income and inflation adjustments would create a cash-flow or tax-bracket problem. Compare that with deferred I Bond taxation and the tax consequences of eventual redemption.
- Check capacity and account location. Confirm the I Bond annual limit, your desired investment size and whether a taxable or tax-advantaged account changes the reporting result.
- Recheck live data before purchase. I Bond rates change every six months, and TIPS real yields move daily. Treasury’s rate pages should be your final check.
When might I Bonds be the more practical choice?
I Bonds may fit a saver who is under the annual purchase limit, can leave the money untouched for at least a year and prefers an account value that is not marked to market every day. The ability to defer federal tax can also help when current cash flow matters more than receiving income now.
They can work as a long-term inflation-linked reserve when you do not need periodic payments. Interest compounds inside the bond, and you can hold it for as long as 30 years. The trade-off is that you cannot scale purchases freely, cannot sell in a market and may have to accept a lower future composite rate after the current reset.
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When might TIPS be the more practical choice?
TIPS may fit an investor who needs a larger purchase, wants a specific maturity, values semiannual cash flow or wants the option to sell. They are also more adaptable for constructing a ladder of inflation-linked maturities.
The costs of that flexibility are market-price risk and annual federal tax on coupon income and inflation adjustments in a taxable account. A TIPS bought at a premium can still have a positive real yield, but its return cannot be inferred from the coupon alone. If you might sell before maturity, evaluate how much price decline you could withstand when real yields rise.
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What are common mistakes when choosing between them?
- Treating the I Bond rate as permanent. The 5.51% composite rate applies to a specified issue period and initial six-month earning period; only the fixed component remains for the bond’s life.
- Comparing a TIPS coupon with an I Bond composite rate. Coupon is a payment rate on adjusted principal; real yield incorporates the purchase price and is the relevant TIPS return measure.
- Ignoring the first-year I Bond lockout. Money needed for an upcoming bill or emergency cannot be placed in an I Bond and then retrieved immediately.
- Assuming the TIPS maturity guarantee applies to an early sale. The original-principal floor applies at maturity. A market sale can be below your purchase price.
- Forgetting phantom income. TIPS inflation adjustments can be federally taxable in the year they occur, even though the adjusted principal is not paid until later.
- Overlooking the purchase cap. A $10,000 annual electronic limit can make I Bonds unsuitable as the sole inflation hedge for a large portfolio.
- Projecting historical winners. The official sources here provide product terms and current rates, not a universal historical result showing that one instrument always outperforms the other.
What is the bottom-line decision?
Choose I Bonds when simplicity, deferred federal tax, a nonmarket account value and long holding periods matter more than liquidity or purchase size. Choose TIPS when you need marketable securities, a defined maturity, periodic payments or the ability to invest more than the I Bond limit.
If both could fit, they can serve different jobs: I Bonds for a capped, long-term inflation reserve and TIPS for a maturity ladder or a larger, tradable allocation. Before buying, compare the I Bond fixed rate with the current TIPS real yield for the same time horizon, then account for taxes, liquidity and the risk that you may need to sell early.
Frequently Asked Questions
Do I receive I Bond interest every month?
No. Treasury calculates interest monthly, but it is added to the bond’s value and compounded semiannually rather than deposited as cash. You generally receive the accumulated value only when you redeem the bond or it reaches maturity.
Does a TIPS coupon payment automatically increase with inflation?
The coupon rate itself is fixed, but the payment is calculated on inflation-adjusted principal. If CPI-U raises principal, the dollar payment normally rises; if deflation lowers principal, the payment can fall while the security is outstanding.
Can I buy both I Bonds and TIPS in the same year?
Yes. They are separate Treasury products with different purchase channels and limits. Combining them can provide an I Bond reserve alongside TIPS maturities or liquidity, but each holding still carries its own tax and access rules.
What should I check on Treasury’s site before buying a TIPS?
Check the auction announcement or your broker’s offering for maturity, price and real yield, then compare that maturity with your planned holding period. Treasury’s daily par real-yield curve is a useful reference, but it is an estimate from secondary-market quotations rather than a guaranteed price for your trade.
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