How the composite rate is built
An I bond's rate has two parts: a fixed rate locked for the bond's entire 30-year life, and an inflation rate that resets every May and November. The official formula is composite = fixed + 2 × semiannual inflation + fixed × semiannual inflation. Example: a 1.20% fixed rate with 3% annual inflation gives 0.012 + 0.03 + (0.012 × 0.015) ≈ 4.22%. Because the inflation half floats, your real projection risk is only the fixed portion — the rest tracks CPI wherever it goes.
The rules that actually bite
You cannot touch the money for 12 months, period. Redeem between years 1 and 5 and you forfeit the most recent 3 months of interest — the calculator's "value if redeemed" column shows that haircut. After 5 years there is no penalty, and the bond keeps earning for 30 years total. Electronic purchases are capped at $10,000 per person per calendar year, so a couple can shelter $20,000 annually.
Where I bonds fit
The fixed rate is the number to watch when buying: it's your guaranteed return above inflation for three decades, and it has ranged from 0% to over 1.9% depending on when you bought. I bonds shine for money that must never lose buying power — an emergency-fund second layer, savings for a goal 2-10 years out — and they're exempt from state and local income tax. They are not a stock substitute: they preserve wealth against inflation rather than growing it much beyond.
How to use this calculator
Enter your purchase amount, the fixed rate on your bond (shown at purchase and locked for 30 years), and an assumed average inflation rate. The calculator applies the official composite-rate formula and projects the value at 1 through 30 years, including the value-if-redeemed column that subtracts the three-month interest penalty for cashing out before year five. Because only the fixed portion is guaranteed, focus your buying decision there — a higher fixed rate is a better long-term deal regardless of where inflation goes. Remember the hard rules the projection can't override: no access at all in the first 12 months, a $10,000 electronic purchase cap per person per year, and federal tax deferred until you redeem.