I Bonds vs EE Bonds Guide: 20-Year Verdict | Bright Side Kit

Rate anatomy: what each bond actually pays

The I Bond’s 4.26% composite rate is two rates glued together. The fixed rate (0.90%) is set at purchase and stays with your bond for its entire 30-year life — it is the only part of an I Bond you truly lock in. The inflation rate (3.34% annualized) is recomputed every six months from the Consumer Price Index; every I Bond holder gets the new inflation rate on their own six-month cycle, while the fixed rate they bought with never changes. The composite formula blends the two (roughly: fixed + inflation + a small cross term), and the current numbers come from the U.S. Treasury’s May 1, 2026 announcement, covering bonds issued May 1 through October 31, 2026. The next reset lands November 1, 2026, and published forecasts expect the composite to rise toward ~4.9% on a higher fixed rate — forecasts, not promises.

The EE Bond is simpler and stranger. Its fixed rate is 2.40% (same May–October 2026 window), locked for the first 20 years. On its face that is a boring rate — until you read the sentence Treasury attaches to every EE Bond issued since May 2005: the bond is guaranteed to be worth at least double its purchase price at 20 years. The guarantee is not a higher rate; it is a one-time adjustment Treasury makes at the 20-year mark if the fixed rate alone would not get the bond to double. At 2.40%, it would not — 2.40% compounded for 20 years reaches only about 1.61× — so the adjustment does real work.

The 20-year doubling, explained

Doubling in 20 years is an effective annual rate of about 3.53% (the 20th root of 2, minus 1). That number is the EE Bond’s secret identity: whatever the stated fixed rate, the bond behaves like a 3.53% floor for anyone who holds the full 20 years. Compare that with the I Bond, whose long-run return is roughly its fixed rate plus average inflation — 0.90% fixed plus whatever inflation averages. If inflation averages 3% for 20 years, the I Bond earns roughly 3.9% and wins. If inflation averages 2%, the I Bond earns roughly 2.9% and the EE’s 3.53% floor wins. The breakeven sits near 2.5–3% average inflation, which is exactly why the calculator’s low-inflation branch flips the verdict. Note the asymmetry: the I Bond’s return is uncertain but inflation-protected; the EE’s is certain in nominal terms but exposed to inflation. They are opposite bets on the same unknown.

Horizon by horizon: the actual numbers

All figures below are for $10,000 in the 22% federal bracket, after federal tax, using the calculator’s model (annual compounding, 3-month penalty under 5 years, EE doubling at 20). One year: the penalty means you earn roughly nine months of interest — the I Bond keeps $10,247.91, the EE Bond keeps $10,139.98, and I Bonds win by $107.92. (Also note: neither bond can be redeemed at all before 12 months.) Five years: no penalty, no doubling yet — the I Bond grows to $12,319.37 and keeps $11,809.11; the EE Bond grows to $11,259.00 and keeps $10,982.02; I Bonds win by $827.09. This is the I Bond’s natural habitat: medium horizons where the inflation kicker compounds and the EE’s guarantee is still a decade away.

Twenty years is where the duel gets interesting, because the answer depends on the one input nobody knows. If the I Bond averages 4.26% for the whole period (inflation stays near today’s 3.34%), it grows to $23,033.21 and keeps $20,165.90 after tax; the EE Bond doubles to $20,000.00 and keeps $17,800.00 — I Bonds win by $2,365.90. But if you type 3.42% as the I Bond’s expected average (0.90% fixed + ~2.5% inflation), the I Bond grows to $19,592.54 and keeps only $17,482.18 against the EE’s $17,800.00 — EE Bonds win by $317.82. Same calculator, same bonds, opposite winner: the only thing that changed was your inflation forecast. That is the entire I-vs-EE question in one comparison.

Tax treatment: the part both bonds share

Here the two bonds are twins. Interest on both is exempt from state and local income tax under 31 U.S.C. §3124 — California, New York, and every other state get nothing. Federal tax is deferred until you redeem (or the bond reaches final maturity at 30 years), which is genuinely valuable: the interest compounds untouched for decades, and you choose the tax year you realize it in — ideally a lower-income year. Both series also qualify for the education tax exclusion: use the proceeds for qualified higher-education expenses, stay under the income phase-out, and the federal tax can be excluded entirely. That last point is why the EE Bond plus a newborn’s 20-year clock is such a natural pair — the doubling and the exclusion stack.

Who should buy which

The I Bond is for money with a 1-to-10-year horizon and an uncertain inflation outlook: emergency reserves past the 12-month lock, a house deposit a few years out, or simply cash you refuse to let inflation quietly tax. Its inflation link means you never have to forecast prices — the bond does it for you, every six months. The EE Bond is for money with a known 20-year date: a newborn’s college fund, a wedding fund for a toddler, or a do-it-yourself annuity rung bought two decades before retirement. It demands the one thing most savers cannot give — genuine indifference to the money for 20 years — and rewards it with the closest thing Treasury sells to a guaranteed 3.53%. Buying both is not fence-sitting; it is diversification across inflation regimes, and the $10,000-per-series annual caps make room for exactly that.

Three mistakes people make

Mistake one: cashing the EE Bond early and expecting the doubling. The guarantee is binary — it exists at 20 years and not at 19. Redeem at year 19 and you get 19 years of 2.40%, no top-up. The EE Bond is a 20-year commitment or it is the wrong bond; there is no partial credit. Mistake two: forgetting the 12-month lock. Every year, someone buys I Bonds with money they need in six months and discovers TreasuryDirect will not give it back. Savings bonds are not a high-yield savings account with extra steps — the first year is a hard lockout, full stop. Mistake three: assuming the I Bond’s 4.26% is a rate. It is a snapshot. The fixed 0.90% is the rate; the 4.26% is this semester’s weather. Anyone projecting 4.26% for 20 years is doing fantasy math — run your own inflation expectation through the calculator instead, and watch how quickly the verdict moves.

If the question behind your question is “where should my cash go right now,” the honest answer is that savings bonds are one parking spot among several: compare them against T-bills in I Bonds vs T-Bills, or see the whole field — T-bills, CDs, savings accounts, and money market funds — in Best Place for Cash 2026. Run your own numbers; the calculator is right above, and it does not care which bond wins.