I versus EE: the difference in a nutshell

I was wondering what the difference (in a nutshell) is between Series I and EE Savings Bonds. When I read about how the interest is accrued, I get lost along the way.

Tom's response

Have you ever noticed how prices tend to rise over time on the same stuff?

When I was a dust-covered boy in Kansas, my doctor's office had a five-cent Coca-Cola machine. Even if you adjust for the fact that today's Coke machines give you cans twice as big as the 6-ounce bottles of the 1950s, today's price is much higher.

That's called inflation. The government's Bureau of Labor Statistics collects the average prices people are paying every month and uses the data to produce the Consumer Price Index.

Series I Bonds are designed to protect you from inflation. The interest rate paid by Series I bonds includes a component that's fixed for the life of the bond when you buy it, plus the rate of inflation as determined by the Consumer Price Index. The Treasury calculates a new interest rate for Series I bonds every six months.

New Series EE Bonds, on the other hand, have fixed interest rates that are adjusted just once during the 30 year life of the bond - at the bond's 20th anniversary. To make any money, your EE bonds have to pay more than the inflation rate during the time you hold the bond, but you don't know what future inflation rates will be when you invest.

Since I bonds were introduced in 1998, they have outperformed Series EE bonds.