Buy series I savings bonds

Series I savings bonds are safe investments issued by the U.S. Treasury, which are designed to protect the value of your hard-earned cash from inflation.

Interest rates on I bonds are adjusted every six months to keep pace with rising prices. The next change is due on Nov. 1.

The current interest rate on I bonds is 4.3% — down from the 9.62% rate in the six months to October 2022, but still a very attractive yield when compared to the average CD rates of 1-2%.

I bonds are a good compound saving tool. Twice a year, the interest you earned in the past six months will be added to your total bond value and you’ll start earning interest (at a new rate) on that higher value.

You can get I bonds in a few different ways. You can buy up to $10,000 worth of electronic I bonds through the government’s TreasuryDirect website and you can also buy up to $5,000 in paper I bonds with your IRS tax refund. The maximum amount you can buy each year is $15,000.

I bonds last for 30 years, but you don’t need to wait three decades to cash in.

Be aware that your money is locked in for one year. After that, if you cash in your bond in less than five years, you’ll have to forfeit three months of interest. There are no further penalties for withdrawal after five years.

As a U.S. Treasury security, I bonds have a very low risk of default. They also offer attractive tax benefits as they’re exempt from state and municipal income taxes.

You do have to pay federal income tax, but there are some exemptions. For instance, if you use the money for qualified higher education expenses, you may not have to pay tax on the earnings.

Make the most of your IRA

While CDs are typically used for short-term savings goals, an individual retirement account (IRA) can help you to save and build your wealth over decades — but you will have to put your money to work.

A traditional IRA is a pre-tax investment account.

You make contributions from your income before taxes are taken out, and the money grows tax-free until you withdraw it in retirement — when you’ll likely find yourself in a much lower tax bracket than in your working years.

In contrast, a Roth IRA is funded with money that’s already been taxed, which means your withdrawals in later life will be tax free.

Unlike CDs, I bonds, and the traditional IRA — which either have maturity dates or mandatory withdrawals — you can leave your money untouched in a Roth IRA for as long as you’d like, making it one of the most flexible options out there for retirement savers.

You can hold many types of investments inside an IRA, including stocks, bonds, ETFs and mutual funds — some of which are more risky than others.

If you lack the know-how to buy individual stocks, you can use a robo-advisor that will manage your IRA portfolio and ensure it is designed to meet your needs.

This story was produced by Moneywise and reviewed and distributed by Stacker Media.