I-Bonds and TIPS
U.S. Treasury securities designed to protect savings from inflation by adjusting with the inflation rate.
I-Bonds and TIPS are two inflation-protected securities issued by the U.S. Treasury. Series I savings bonds (I-Bonds) pay a fixed rate plus an inflation rate that resets periodically, are bought directly from TreasuryDirect, and are capped at an annual purchase amount per person. Treasury Inflation-Protected Securities (TIPS) are marketable bonds whose principal adjusts with the Consumer Price Index, so both their value and interest payments rise with inflation.
Both exist to solve the same problem: cash and conventional bonds lose purchasing power to inflation, while these instruments are designed to keep pace with it. They're often used for the safe, near-term portion of a portfolio or an emergency fund's inflation hedge. The tradeoffs are purchase limits and liquidity rules for I-Bonds, and the tax treatment of TIPS' inflation adjustments, which can be taxed before you receive them unless held in a tax-sheltered account.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.