Three government bonds promise inflation protection but deliver it through very different mechanisms. I-Bonds have an annual $10K limit but zero direct interest rate risk. TIPS have no purchase limit but complex tax treatment. Series EE bonds guarantee doubling in 20 years — a unique guarantee worth roughly 3.5% annual return if held the full term.
Each wins in specific scenarios. None is universally best.
I-Bonds
Series I Savings Bonds from TreasuryDirect:
- Purchase limit: $10,000/year per person ($20K for married couples, $40K with kids)
- Interest: fixed rate + inflation rate, adjusted semi-annually
- Can't sell first 12 months; selling in years 2-5 forfeits last 3 months interest
- After 5 years, no penalty
- Tax: federal only (state exempt); can defer until redemption
- Education exemption: tax-free if used for qualified education expenses
Current I-Bond rate (late 2025): variable, but recent rates have been 3-5% composite. When inflation spiked in 2022, I-Bond rates hit 9.62% briefly.
TIPS
Treasury Inflation-Protected Securities:
- Purchase at TreasuryDirect or through brokerages
- No annual purchase limit
- Principal adjusts with CPI
- Fixed "real" interest rate on adjusted principal
- Inflation adjustment is taxable annually (phantom income)
- Maturities 5, 10, 30 years
Current 10-year TIPS real yield: ~2%. Combined with expected inflation, total yield roughly 4-5%.
TIPS belong in tax-advantaged accounts due to phantom income issue.
Series EE Bonds
Series EE Savings Bonds from TreasuryDirect:
- Purchase limit: $10,000/year per person
- Guaranteed to double in 20 years (equivalent to 3.526% annual return)
- Current fixed rate is much lower (2.7%)
- Tax: federal only, deferred until redemption
- Education exemption available
The 20-year doubling guarantee is the feature. If you hold exactly 20 years, your $10K becomes $20K. Sell before 20 years and you get only the fixed-rate interest (currently much less than doubling).
The Comparison Framework
I-Bonds: best for near-term inflation hedging with strict $10K/year limit. Won't lose value. Tax-efficient in taxable accounts.
TIPS: best for larger allocations to inflation protection. No purchase limit. Requires IRA/Roth to avoid phantom income.
Series EE: locked 20-year doubling guarantee. Not useful unless you can commit to 20-year hold and believe inflation will stay moderate.
The Current Environment Choice
In 2026 with inflation moderating and real yields positive:
- $10K/year in I-Bonds: reasonable default
- TIPS in IRA: for additional inflation protection
- Series EE: only if you know you'll hold 20 years and want guaranteed 3.5%
Stacking: buy I-Bond to limit, then TIPS for additional exposure. Skip Series EE unless 3.5% guaranteed return matters more than higher expected returns elsewhere.