What Is the 3-Month Penalty for Redeeming I Bonds Early?
Learn about the 3-month interest penalty on I Bonds if redeemed within five years and how it affects your investment returns.
Video transcript
The 3-month penalty for I bonds applies if you redeem them within the first 5 years. This means you will forfeit the last three months of interest earned, making them less ideal for short-term investments.
Questions and answers
What happens if I redeem I Bonds before 5 years?
Redeeming I Bonds before 5 years results in forfeiting the last three months of interest earned as a penalty.
Is there a minimum holding period for I Bonds?
Yes, I Bonds must be held for at least 12 months before you can redeem them, but redeeming before 5 years incurs a 3-month interest penalty.
How does the 3-month penalty affect I Bond returns?
The 3-month penalty reduces your total interest earned by forfeiting the last three months' interest when redeemed early.
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