I Bonds vs High-Yield Savings Calculator
The money, the months, and the two rates
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Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the amount you would put into either one and the months until you need the money.
- 02
Enter the savings account's APY. It is held for the whole period, which no bank promises; for scale, the 1-year Treasury yielded 4.37% on 14 September 2026.
- 03
Enter the annual inflation you expect after the bond's first six months. The bond's fixed rate and first six-month inflation rate are filled in for bonds issued 1 May to 31 October 2026.
- 04
Enter your federal and state income tax rates. The savings account pays both every year; the I bond pays only federal tax, when you cash it.
- 05
Read which ends ahead and by how much, the savings APY at which they tie, and the table showing the race on each month you might cash out.
Formula
I bond: its value month by month as on the I Bond Calculator, with composite rate = fixed rate + 2 × six-month inflation rate + fixed rate × six-month inflation rate, compounding every six months. Cashed before 60 months, it pays its value three months earlier. After-tax value = amount received − (amount received − purchase price) × federal rate. For a holding period under 12 months, both sides are compared at 12. Savings account: after-tax value = amount × (1 + APY × (1 − federal rate − state rate))^(months ÷ 12), which takes tax out of each year's interest. The lead is the difference between the two after-tax values. Tie APY = ((I bond after-tax value ÷ amount)^(12 ÷ months) − 1) ÷ (1 − federal rate − state rate).
Example
$10,000 is set aside for 36 months. The I bond, issued in the May to October 2026 window, earns 4.26% for six months and then 4.30% on an assumed 3.4% inflation. Cashed at month 36 it pays $11,238.96 after a $120.18 penalty, and 22% federal tax on its $1,238.96 of interest leaves $10,966.39, with no state tax. The savings account pays a 4.00% APY taxed at 22% federal and 5% state each year, an after-tax yield of 2.92%, and ends at $10,901.83. The I bond is ahead by $64.56 and would avoid $61.95 of state tax. The savings account would need a 4.28% APY to tie. Cashed at 12 months instead, the savings account would lead by $40.68; held 60 months, the I bond would lead by $299.23.
Definitions
- APY
- Annual percentage yield: the yearly return on a savings account with compounding included. It is variable and can change at any time.
- Composite rate
- The rate an I bond earns for six months, built from its fixed rate and the current six-month inflation rate.
- Early redemption penalty
- The last three months of I bond interest, lost when a bond is cashed between 12 months and five years.
- Tie APY
- The savings account APY at which the account and the I bond finish level after tax over the holding period entered.
- State tax exemption
- I bond interest is free of state and local income tax, while interest from a savings account is taxed by the state as well as the IRS.
Good to know
Why the answer depends on the month you cash out
An I bond and a high-yield savings account look as if they compete on rate: 4.26% on bonds issued May to October 2026 against whatever the account's APY is. The rate is the least of it. The bond cannot be cashed at all for 12 months, loses its last three months of interest if cashed before five years, and is taxed differently. Each of those rules weighs differently depending on how long you hold, so the same two choices can swap places as the months pass. This page's example shows it clearly. With $10,000, a 4.00% savings APY, 3.4% assumed inflation, a 22% federal rate and a 5% state rate, the savings account is ahead at 12 months, $10,292.00 after tax against $10,251.32 for the bond, because the penalty takes $110.37 of the bond's first year of interest. At 18 months the account's lead is down to $16.76. At 24 months the bond is ahead by $8.72, and at 36 months by $64.56. At 60 months, with no penalty left, the bond leads by $299.23. The penalty explains the shape. It is three months of interest whether you cash the bond at 13 months or 59, so the shorter the hold, the larger the share of the total it takes. The tax advantages work the other way and build over time. The page's tie APY puts a number on the crossing: the savings rate at which both finish level after tax for your holding period. In the example it is 3.44% at 12 months, 4.28% at 36 months and 4.72% at 60 months. A savings account paying more than the tie APY for your period wins; one paying less loses. The practical lesson is to decide how long the money can really stay put before choosing, and to be honest about the chance you will need it sooner.
What each account's taxes do to the race
Taxes are the I bond's main advantage, and they come in two parts. First, I bond interest is exempt from state and local income tax, according to TreasuryDirect, while interest from a savings account is taxed by your state as well as the IRS. On this page's example the bond avoids $61.95 of state tax over 36 months at a 5% rate. In a state with no income tax that advantage disappears, and in a high-tax state it grows. Second, the timing differs. A savings account's interest is taxable every year, so part of each year's interest goes to tax and stops earning anything. An I bond's federal tax, under IRS Publication 550, can wait until the bond is cashed or reaches final maturity, so all of its interest keeps compounding. The page models the savings account as paying its tax each year out of its interest, which lowers its yield from a 4.00% APY to 2.92% after 22% federal and 5% state tax. Over 36 months that yearly tax costs the account $346.81, counting the interest the tax money would have earned. The bond pays its federal tax once, at the end: $272.57 on $1,238.96 of interest. Because the tax rules differ, comparing the two headline rates directly is misleading. Held past five years, an I bond and a savings account quoting the same rate are not equal: after tax, a taxpayer in the example's brackets keeps more of every dollar of the bond's interest. The tie APY folds all of this into one comparable number. Your own figures matter here, since a lower federal bracket, a zero state rate or a short holding period each narrow the bond's lead or reverse it. Enter your actual marginal rates. If you normally pay the tax on savings interest from other money, the cost is the same money, just taken from somewhere else.
Rates that move: the assumptions behind any answer
Both sides of this comparison rest on rates that will change. A high-yield savings account's APY is not guaranteed. Banks can raise or cut it whenever they choose, and savings rates generally move with short-term interest rates. For scale, the 3-month Treasury yielded 4.11% and the 1-year Treasury 4.37% on 14 September 2026, while the FDIC's national average rate on savings accounts was 0.38% in its August 2026 report, so an ordinary account and a high-yield one can differ by several percentage points. The page holds the APY you enter for the whole period, which is the simplest assumption and seldom exactly what happens. The I bond's rate also moves, but by a published rule. The 0.90% fixed rate on bonds issued 1 May to 31 October 2026 lasts for the life of the bond. The inflation part resets every six months from the issue month, following CPI-U. The next rates are announced on 1 November 2026 and are not known yet, so after the first six months the page uses your inflation assumption. If inflation falls, the bond's rate falls with it; if inflation rises, the bond's rate rises, which is the protection you are paying for with the lock and the penalty. That difference in how the two rates move is part of the choice. A savings rate follows interest rates set in the market and by the Federal Reserve, which do not always track inflation month by month. An I bond's rate tracks CPI directly. To see how sensitive the answer is, rerun the page with a lower and a higher inflation assumption and a lower APY. If one side wins in every run, the decision is robust. If the winner flips, the choice is really about which risk you would rather carry, and how soon you might need the money may settle it.
Deciding which money goes where
The comparison is really about how much of your cash can be locked away. Money you might need within 12 months cannot go into an I bond, because the bond cannot be cashed before then under any circumstances. That covers an emergency fund and most near-term savings, which belong in an account you can reach the same week. The Emergency Fund Calculator helps size that amount first. Money you are confident you will not need for five years suits the I bond best, since the penalty no longer applies and its state tax exemption and federal tax deferral have had time to add up. Between one and five years, the answer depends on your rates and on the tie APY this page calculates. Size is a constraint too. One Social Security number can buy only $10,000 of electronic I bonds per calendar year, so a large cash balance cannot move into bonds all at once. Spouses each have their own limit, and a new calendar year opens a new one. One workable approach is to keep the emergency fund in savings and add to I bonds a year at a time with money beyond it. Because each bond's lock and penalty run from its own issue month, bonds bought in different months become penalty-free at different times, which gives a later need more than one bond to draw on. Keep in mind what neither account does. Neither grows your buying power by much at these rates: on the example's assumptions, the bond held 60 months earns about 0.91% a year above inflation before tax, and the savings account's 2.92% after-tax yield is below 3.4% inflation. Both are tools for safety and access, not growth. For money that can stay invested far longer, the Real vs Nominal Return Calculator shows what a higher-returning investment keeps after tax and inflation.
Frequently asked questions
Are I bonds better than a high-yield savings account?
It depends on how long you hold, the two rates and your state tax. On this page's example, $10,000 for 36 months with a 4.00% APY, 3.4% assumed inflation, a 22% federal rate and a 5% state rate, the I bond finishes at $10,966.39 after tax and the savings account at $10,901.83, so the bond is ahead by $64.56. The savings account would need a 4.28% APY to tie.
Why does the savings account win over the first year?
Because of the I bond's 3-month penalty. Cashed at 12 months, the example bond gives up $110.37 of interest and ends at $10,251.32 after tax, against $10,292.00 in the savings account. At 18 months the account still leads by $16.76, at 24 months the bond is ahead by $8.72, and at 60 months, when the penalty no longer applies, the bond leads by $299.23.
What if I need the money in less than a year?
Then an I bond is not an option: it cannot be cashed in its first 12 months. The page compares both at 12 months so you can see what waiting would mean, but money you need sooner belongs in a savings account or another account you can reach.
How much does state tax matter?
Savings interest is taxed by your state; I bond interest is not. In the example the bond avoids $61.95 of state tax over 36 months at a 5% rate. In a state with no income tax that advantage disappears, so enter 0 to see whether the result changes for you.
Why does the I bond's tax timing help?
The savings account pays tax on its interest every year, so less money is left to compound, while the I bond's interest compounds untaxed until you cash it. In the example the savings account's yearly tax costs it $346.81 over 36 months, including the interest that money would have earned. The bond pays its federal tax once, $272.57, when it is cashed.
Does the page assume rates stay the same?
Yes for the savings account. For the I bond, the first six months use the announced rate and later periods use your inflation assumption. Savings APYs change when the bank decides, and the I bond's inflation rate resets every six months; only its 0.90% fixed rate is locked. The next I bond rates are announced 1 November 2026.
What does the tie APY mean?
It is the savings APY at which both finish level after tax over your holding period. In the example it is 4.28% at 36 months. At 12 months it is 3.44%, below the 4.00% APY entered, which is why the savings account wins there; at 60 months it is 4.72%.