How to Choose Between I-Bonds and T-Bills

Compare I-Bonds vs Treasury Bills to decide which government investment fits your savings goals and timeline better.

1. Check your timeline and liquidity needs. I-Bonds lock up your money for 12 months minimum — you literally cannot access it. T-Bills mature in 4 weeks to 52 weeks, and you can sell them early on the secondary market. If there's any chance you'll need the money within a year, T-Bills are your only option.
2. Compare current rates and inflation protection. I-Bonds pay a fixed rate plus an inflation adjustment that changes every six months — as of late 2024, the composite rate is around 4.28%. T-Bills pay whatever rate you lock in at purchase, typically 4.5-5.2% for shorter terms. I-Bonds protect against future inflation spikes; T-Bills give you a known return.
3. Factor in purchase limits and penalties. You can only buy $10,000 in I-Bonds per year electronically, plus $5,000 with your tax refund. T-Bills have no annual limits — you can invest as much as you want. I-Bonds charge a 3-month interest penalty if you cash out before 5 years; T-Bills have no penalties.
4. Consider taxes and your holding period. Both are exempt from state and local taxes, but you owe federal tax on the interest. With I-Bonds, you can defer federal taxes until you cash out or they mature at 30 years. T-Bill interest is taxable in the year the bill matures, giving you less control over timing.
5. Match your choice to your savings goal. Use I-Bonds for long-term emergency funds or money you're saving for 2-10 years out where inflation protection matters more than liquidity. Use T-Bills for short-term goals, parking cash between investments, or when you want predictable returns without inflation uncertainty.