[ad_1] Rising inflation headlines got you on edge? Or maybe you’re already feeling the rising costs on your budget. You’re not alone. A lot of people are worried about inflation these days, and for good reason. There are a couple of different ways you can try to protect yourself from inflation. One way is to invest in Series I Bonds. Another option is to invest in TIPS, which stands for Treasury Inflation-Protected Securities. Both are solid options, but which one is the better inflation hedge? 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A financial advisor can help you get your finances in order and plan for the future. Click on your state to get started. HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas Get Started Inflation Current Status Inflation continues to soar, as the CPI just reported a 9.21% annualized inflation rate for the month of June. This is the highest inflation has been since 1981, according to CNBC, and it’s only going to continue to go up. And, according to JPMorgan, we could see inflation reach 10% by the summer of 2023. With all of this in mind, it’s no wonder that people are scrambling to find ways to protect themselves from inflation. Let’s take a closer look at I Bonds vs TIPS to see which is the better inflation hedge… What are Inflation-Indexed Bonds? Inflation-indexed bonds are debt securities issued by the United States government that provide protection against inflation. The principal value of these bonds rises with inflation and falls with deflation, as measured by the Consumer Price Index (CPI). The interest payments on these bonds are fixed, meaning that they do not change with fluctuations in inflation or deflation. Inflation-indexed bonds are sometimes referred to as “Real Return Bonds” or “TIPS”, which stands for Treasury Inflation-Protected Securities. What are Series I Bonds? I Bonds are a type of inflation-indexed bond that is issued by the U.S. government. The interest rate on I Bonds is composed of two parts: A fixed-rate, which remains the same for the entire 30-year life of the bond An inflation-adjusted rate changes every six months to keep pace with the CPI. I Bonds can be purchased directly from the U.S. Treasury’s website, through a financial institution, or a payroll savings plan. I Bonds are also available in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. If you’re interested in adding them to your investment portfolio, be sure to check out our step-by-step tutorial on purchasing Series I Bonds. I Bonds are limited to $10,000 per person, per year. However, there is a way to get around this limit by using a legal loophole that I discovered. 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Download Now Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures. How Series I Bonds and TIPS Are Similar Both I Bonds and TIPS are issued by the U.S. government. As safe as it gets when it comes to investing your money during these uncertain times, the U.S. government will not default on your I Bonds or TIPS or refuse to pay back your money. Both I Bonds and TIPS protect us, and help us hedge against inflation. Albeit in different ways which we’ll talk about it later on similarity. Both I Bonds and TIPS are adjusted for inflation based on the CPI-U consumer price index. The CPI-U measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services and is considered the most representative measure of inflation similarity. Both I Bonds and TIPS can be bought online. These bonds can be purchased on Treasurydirect.gov a website run by the U.S. treasury department that lets individual investors like you and me buy and redeem securities directly from the government at no cost similarity. Both I Bonds and TIPS are exempt from local and state taxes, but not federal taxes. Note: except under special circumstances, which we’ll cover shortly. Those were the similarities. Now let’s talk about the differences between the two, because it’s the differences that have driven many to use I Bonds versus TIPS as an inflation hedge in their personal portfolio. 8 Differences of Series I Bonds vs TIPS There are eight key differences between I Bonds versus TIPS. The method of purchase, the minimum holding period, the purchase limits the terms or maturities the way of adjusting for inflation, the method of taxation, the interest floor, and the return of principal. Let’s dive into the differences… 1. How You Purchase Them You can only buy and redeem I Bonds from Treasurydirect.gov, unlike TIPS. I Bonds are “non-marketable” or which means not available in the secondary market. You can’t