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Tomorrow is your last chance to earn a 'nearly risk-free' 9.6% return on your money

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If you've been looking for an investment to keep up with inflation, everyone from your financial planner to your dad to Suze Orman has likely recommended looking into Series-I savings bonds, also known as "I bonds."

It's easy to see why. These inflation-adjusted bonds backed by the U.S. government pay a fixed rate throughout the life of the bond, plus an inflation rate pegged to changes in the consumer price index. Given how high inflation has been, these bonds currently offer a record 9.62% annual interest rate.

But not for long. I bond rates shift twice per year, and the next change is scheduled for November, at which point the rate is expected to drop to 6.48%.

To guarantee yourself six months worth of interest at the higher rate, you must purchase and receive a confirmation email before midnight on October 28, according to TreasuryDirect, the website where these bonds are exclusively sold.  

If you haven't bought in already, rushing to get it done by tomorrow could be worth it, says Naveen Neerukonda, a certified financial planner with PVA Financial in Chicago, Illinois. If you already have certain bases covered financially, "this is a great opportunity, given the nearly risk-free nature of I bonds," he says.

Here's what you need to know.

Why I bonds are attractive right now

Typically, when it comes to bonds, investors earn a higher rate of interest in exchange for taking on more risk, either because the bond is sensitive to movements in interest rates or because the issuer is more likely than others to default.

These rules don't apply to I bonds. Because you must buy these bonds directly from the Treasury, they don't trade on the secondary market and are therefore don't gain or, crucially, lose value based on market demand.

And because these bonds are backed by the U.S government, which has always made good on its debts, they are highly unlikely to default.

While the risk of owning I bonds is negligible, the reward is currently substantial. The 9.6% yield you can lock in by Friday dwarfs the interest rates you'll find elsewhere.

A 1-year certificate of deposit, another investment considered basically risk-free, currently yields 1.05%, on average, according to Bankrate.  The interest rate on a 5-year U.S. Treasury is 4.2%. An index tracking the broad bond market – where you'll find interest rate and default risk — currently yields 5%.

I bond caveats: 'Think very cautiously about this'

I bonds may not be suitable for every investor, however. You can't redeem these bonds for at least one year after you purchase them. Plus, you'll owe a penalty equal to three months of interest if you cash out any time over the first five years of owning the bond.

"If there is any chance you need this money within the next 12 to 15 months, then you need to think very cautiously about this," says Neerukonda. If you don't have a well-funded emergency fund, I bonds may not be a wise place to park your money.

You can purchase up to $10,000 worth of these bonds per person per calendar year (though some strategies allow you to purchase more), which limits your return potential, says Kevin Brady, a CFP and vice president at Wealthspire Advisors in New York City. "We are not talking about a material amount of incremental interest for most people," he says.

Even if you're able to max out your contribution at the record-high interest rate, you're looking at a profit of less than $1,000 after one year.

Nevertheless, financial pros see these bonds as an excellent addition to broadly diversified portfolios geared toward short- to intermediate-term goals. "If you're saving for a wedding in 2024, adding I bonds could definitely be a smart idea," says Neerukonda.

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