When i-bonds have a fixed rate of zero they are guaranteed to under-perform inflation since you still must pay federal income tax (not even LTCG) on their increase in nominal value.
An i-bond needs to have a fixed rate of at least 0.27% to cover the interest on the 2% target rate of inflation, assuming a 12% income tax rate. If inflation was sustained at 9% the i-bond fixed rate would need to be 1.2% to make it not lose value.
I-bond is an interestingly alternative when you'd otherwise just hold cash, but with the fixed rate of 0 it's not that exciting. Other than cash few other investments are guaranteed to lose money relative to inflation.
I would avoid buying I-bonds with a fixed rate under 0.5% and certainly under 0.2%.
... and that's entirely without getting into the argument that the government systematically underestimates inflation e.g. by CPI-U having an open-loop correction for substitution.
An i-bond needs to have a fixed rate of at least 0.27% to cover the interest on the 2% target rate of inflation, assuming a 12% income tax rate. If inflation was sustained at 9% the i-bond fixed rate would need to be 1.2% to make it not lose value.
I-bond is an interestingly alternative when you'd otherwise just hold cash, but with the fixed rate of 0 it's not that exciting. Other than cash few other investments are guaranteed to lose money relative to inflation.
I would avoid buying I-bonds with a fixed rate under 0.5% and certainly under 0.2%.
... and that's entirely without getting into the argument that the government systematically underestimates inflation e.g. by CPI-U having an open-loop correction for substitution.