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Student loan default rates may spike if the Biden administration’s loan forgiveness plan is blocked, a top official at the U.S. Department of Education warns.
The department anticipates there “could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” Undersecretary James Kvaal said in the filing.

Student loan borrowers gather near The White House to tell President Biden to cancel student debt on May 12, 2020.
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Student loan default rates could dramatically spike if the Biden administration’s loan forgiveness plan is blocked, a top official at the U.S. Department of Education said in a new court filing.
The warning came as the Department of Justice asked a federal judge in Texas to stay an order that has temporarily blocked the Biden administration’s debt relief program.

“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” Education Department Undersecretary James Kvaal said in the filing.
The Biden administration stopped accepting applications for its student loan forgiveness plan last week after Judge Mark Pittman of the U.S. District Court for the Northern District of Texas called the policy “unconstitutional” and struck it down.
Meanwhile, six GOP-led states argued in another lawsuit that the president’s loan relief program threatened their future tax revenues and circumvented congressional authority. Their challenge had been rejected by a federal judge, but then the states appealed and the 8th Circuit Court of Appeals in St. Louis issued a nationwide injunction temporarily barring the Biden administration from moving forward with its plan.

Student loans plagued with problems before Covid

Even before the pandemic, when the U.S. economy was enjoying one of its healthiest periods in history, problems plagued the federal student loan system.
Only about half of borrowers were in repayment in 2019, according to an estimate by higher education expert Mark Kantrowitz. About 25% — or more than 10 million people — were in delinquency or default, and the rest had applied for temporary relief for struggling borrowers, including deferments or forbearances.

These grim figures led to comparisons to the 2008 mortgage crisis.

Federal student loan payments have been on pause since March 2020, when the coronavirus pandemic first hit the U.S. and crippled the economy. Resuming the bills for more than 40 million Americans will be a massive task, and the Biden administration had hoped to ease the transition by forgiving a large share of student debt first.
However, since President Joe Biden announced his plan in August to cancel up to $20,000 for tens of millions of borrowers, conservative groups and Republican states moved quickly to try to block it. 
Despite offering student loan borrowers forbearances during previous natural disasters, default rates still skyrocketed, Kvaal said in the filing.
“[T]he one-time student loan debt relief program was intended to avoid” that problem, he added.

18 million borrowers most at risk for default

The borrowers most in jeopardy of defaulting are those for whom Biden’s student loan forgiveness plan would have wiped out their balance entirely, Kvaal said. The administration estimated its policy would do so for around 18 million people.
“These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans,” Kvaal said. “This belief may well stop them from making payments even if the Department is prevented from effectuating debt relief.”
“Unless the Department is allowed to provide one-time student loan debt relief,” he went on, “we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe.”

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After a rough year for cryptocurrency, including the recent FTX collapse, there may be tax opportunities for crypto investors.
Despite recent losses, investors may have surprise gains for 2022, according to experts.

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After a rough year for cryptocurrency, taxes may not be a top priority for digital currency investors battered by steep losses.
But the falling crypto market and the recent collapse of digital currency exchange FTX may affect next year’s tax bill — and beyond, according to financial experts.

Despite recent losses, “gains from earlier in the year are still on the books,” said Andrew Gordon, tax attorney, CPA and president of Gordon Law Group.
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Typically, crypto trading is more active when the market is going up, and that’s when you are more likely to incur gains, he said.
However, it’s also possible to have profits even when the market drops, depending on when you bought and sold the assets.

The IRS defines cryptocurrency as property for tax purposes, and you must pay levies on the difference between the purchase and sales price. 

While buying digital currency isn’t a taxable event, you may owe levies by converting assets to cash, trading for another coin, using it to pay for goods and services, receiving payment for work and more.

How to reduce your crypto tax bill

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If you’re sitting on crypto losses, there may be a silver lining: the chance to offset 2022 gains or carry losses forward to reduce profits in future years, Gordon explained.
The strategy, known as tax-loss harvesting, may apply to digital currency gains, or other assets, such as year-end mutual fund payouts. After reducing investment gains, you can use up to $3,000 of losses per year to offset regular income. 
And if you still want exposure to the digital asset, you can “sell and rebuy immediately,” said Ryan Losi, a CPA and executive vice president of CPA firm, PIASCIK.
Currently, the so-called “wash sale rule” — which blocks investors from buying a “substantially identical” asset 30 days before or after the sale — doesn’t apply to cryptocurrency, he said. 

How the FTX collapse may affect your taxes

While crypto taxes are already complex, it’s even murkier for FTX customers. “There are different ways it can be treated, depending on the facts of the case,” Losi said.
You may be able to claim a capital loss, or “bad debt deduction,” and write off what you paid for the asset. But “it should only be done when that loss is certain,” Gordon said.
With FTX’s bankruptcy case in limbo, customers may opt to file for a tax extension and wait for more details to emerge, Losi said.
“It’s a question for the individual and their tax preparer,” Gordon added. “There’s not a clear way to go with it.”

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Simplified filing tools that enable individuals and families to submit their information to claim 2021 tax credits have final deadlines this week.
Here’s how individuals and families may still claim the $1,400 stimulus checks and enhanced child tax and earned income tax credits.

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If you haven’t filed a 2021 federal tax return, there may be a chance you could be missing out on some generous tax credits.
A simplified filing tool — GetCTC.org — will let you submit your information in order to receive any money due to you.

But you have to act fast. The deadline to use GetCTC.org to claim the 2021 tax credits is Tuesday, Nov. 15 at 11:59 p.m. Pacific time.
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The advantage of using GetCTC.org is that it offers a simplified filing process, according to Roxy Caines, earned income tax credit campaign director at the Center on Budget and Policy Priorities.
For those who miss today’s deadline, there are other opportunities to claim the money, including next through the IRS Free File program that is open through Thursday, Nov. 17 until midnight Eastern time. Beyond that date, they will still be able to claim by filing a federal tax return.
“This is not the very last deadline,” Caines said. “People will be able to claim tax credits that they’re eligible for through Tax Day 2025.”

How much the 2021 tax credits are worth

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The American Rescue Plan Act passed by Congress in 2021 temporarily made enhanced tax credits available to millions of Americans.
That included a Recovery Rebate Credit that provided third stimulus checks of $1,400 per person.
It also made existing tax credits — the child tax and earned income tax credits — more generous.
The child tax credit included up to $3,600 for children under age 6 and $3,000 per child ages 6 through 17. Up to half of those amounts were paid in advance through monthly child tax credit payments. However, to claim the remaining sums — or the total amount if a family did not receive advance payments — they need to file a federal 2021 income tax return.
The earned income tax credit, which applies to low- and middle-income workers, was also enhanced for that tax year. Workers with no children may qualify for up to $1,502, which increases to as much as $6,728 for filers with three or more children. Because eligibility was expanded for workers without children and younger and older age thresholds, more workers qualify for the credit in the 2021 tax year.

Who may have yet to file

In October, the IRS sent letters to more than 9 million families who still have not filed federal tax returns to alert them they may still qualify for these credits.
While Republican congressional leadership questioned the timing of the notices so close to the midterm elections, Caines said she did not see it as unusual.
“We have seen that it takes the IRS a long time to coordinate these type of outreach efforts,” Caines said.
The letters were similar to notices the agency sent in September 2020 that also alerted 9 million non-filers they could be missing the stimulus checks that were sent that year.

Many of the non-filers are not required to file tax returns due to low incomes.
That population tends to include people who are harder to reach, who may not speak English or who live in households with mixed tax-filing statuses, Caines said.
For people in this population, it is important to know they may be eligible for these tax credits, even if they have not qualified in the past, she said.
Still, some may hesitate to file for the credits in the first place.
At a recent panel hosted by the Bipartisan Policy Center former IRS commissioner John Koskinen said administrative barriers, including long waits for customer service from the tax agency, may contribute to the problem.

Misperceptions about the consequences people may face after filing may also contribute to the problem.
People may hesitate to file a tax return if they fear they owe money, Caines said. But if they qualify for the more generous 2021 tax credits, it could reduce their tax debts and enable them to claim refunds in the future, she said.
Another reason people may hesitate to claim is due to immigration concerns: that, by filing tax returns, they could put themselves or a family member at risk of deportation.
“The IRS is prohibited from sharing tax information with anyone, including ICE, except in cases of investigating criminal cases,” Caines said.

Ways to claim the money

GetCTC.org, which is available in English and Spanish, provides a simplified filing process with questions to prompt users to input their information. The tool allows for people to claim the $1,400 stimulus checks, child tax credit and earned income tax credit for the 2021 tax year.
“Taxes can be intimidating; GetCTC has prompts built into it,” Caines said.
Notably, if you want to claim the earned income tax credit using GetCTC.org, you will have to have a W-2 demonstrating your income handy.
For people who have earned income they can show through 1099 forms or self-employment income, other filing tools may let them claim the 2021 enhanced earned income tax credit, Caines said.
IRS Free File, which will stay open until Nov. 17 for the 2021 tax year, lets people whose incomes are $73,000 or less file online. Free fillable forms are available for any income level.
Individuals and families who miss both the GetCTC.org and IRS Free File deadlines still have up to three years to file their tax returns and claim the 2021 tax credits for which they may be eligible.
People who miss this week’s deadlines may want to try to find a Volunteer Income Tax Assistance site near them that will handle prior year returns, Caines said.

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New rules that will be beneficial for some Medicare enrollees are going into effect Jan. 1.
The idea is to eliminate any delays in coverage that some new beneficiaries experience, depending on when they enroll.
Additionally, individuals who didn’t sign up when they were supposed to due to “exceptional circumstances” may be able to qualify for a special enrollment period.

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For some individuals, signing up for Medicare hasn’t translated into coverage starting right away.
That’s poised to change: Beginning next year, current months-long delays in certain Medicare enrollment situations will be eliminated. Additionally, would-be beneficiaries who missed signing up when they were supposed to due to “exceptional circumstances” may qualify for a special enrollment period.

Such delays can mean facing a gap in health insurance — which in turn may translate into either being unable to get needed care due to financial constraints or paying out of pocket for care, whether planned or an emergency.
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“It’s really about having access to pretty essential health services,” said Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center.

Signup rules for Medicare can be confusing

Medicare’s enrollment rules can be confusing at best and costly at worst, experts say.
For people who tap Social Security before age 65, enrollment in Medicare (Part A hospital coverage and Part B outpatient care coverage) is automatic when they reach that eligibility age.

Otherwise, you are required to sign up during your “initial enrollment period” when you hit age 65 unless you meet an exception, such as having qualifying health insurance through a large employer (20 or more workers).

One change applies to initial enrollment periods

Your initial enrollment period, as it’s called, starts three months before your 65th birthday and ends three months after it (seven months total). According to the law, when coverage begins for a Medicare enrollee is dependent on which month that person enrolls. If you enroll before the month you turn 65, coverage starts the first of your birthday month; enroll in your birthday month and coverage starts the following month.
The new rules eliminate the delay that new beneficiaries have faced if they enrolled toward the end of the seven-month period: Enrolling a month after hitting age 65 has meant coverage takes effect two months after that. Waiting longer than that, but still in that seven-month window, has meant a coverage delay of three months.
Starting next year, coverage will take effect the month after you sign up.

Another coverage delay will disappear, but not penalties

If you miss your initial enrollment period and don’t qualify for a special enrollment period, you generally can only sign up during the first three months of the year during a “general enrollment period.”
Going that route also has meant waiting until July for coverage to take effect. Next year, it will be effective the month after you sign up.
However, in that situation, there may still be a late-enrollment penalty. For Part B, it’s 10% of the standard premium ($164.90 for 2023) for each 12-month period you should have been enrolled but were not.

Part D (prescription drug coverage) also comes with a late-enrollment fee. It’s 1% of the “national base premium” ($32.74 in 2023) multiplied by the number of months that you went without Part D since your enrollment period (if you didn’t have qualifying coverage in place of it). 
In both cases, late enrollment penalties are generally life-lasting.

‘Exceptional circumstances’ may offer flexibility

Starting next year, individuals may be able to sign up outside of current enrollment periods if they have “exceptional circumstances.” This is already a flexibility available with Part D, as well as Medicare Advantage Plans (which deliver Parts A and B and usually D), Schwarz said.
“It’s really designed to provide relief for people who are impacted by exceptional situations and need access to health insurance,” she said.
Additionally, beneficiaries who qualify for the special enrollment period will not face Part B late enrollment penalties.

Until this rule change, the only way to qualify was if a government official provided bad information or made a mistake that caused you not to enroll.
“There are situations where … people make mistakes,” Schwarz said. “So these rules allow some flexibility.”
Some qualifying circumstances could include an employer providing inaccurate information about Medicare enrollment, or they were in a situation where it was impossible or impractical to enroll, such as being in a natural disaster or incarcerated.

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With the legal challenges to Biden’s student loan forgiveness plan mounting, the administration might extend the payment pause on the monthly bills yet again.
“I’m sure they have to be considering it as an option,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

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With the legal blows to President Joe Biden’s student loan forgiveness plan mounting, it’s possible that the administration could extend the payment pause on the monthly bills yet again, experts say.
“I’m sure they have to be considering it as an option,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

If the president’s policy remains blocked in the courts by the end of the year, higher education expert Mark Kantrowitz said, “the Biden Administration is likely to further extend the payment pause.”
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The Washington Post reported this week that officials in the White House are beginning to discuss the possibility of another extension if the lawsuits continue to thwart its loan forgiveness plan. It would be the eighth time borrowers have been given more time.
Federal student loan payments have been on pause since March 2020, when the coronavirus pandemic first hit the U.S. and crippled the economy. Resuming the bills for over 40 million Americans will be a massive task, and the Biden administration had hoped to smooth the transition by forgiving a large share of student debt first.
However, since the president announced his plan in August to cancel up to $20,000 for tens of millions of borrowers, conservative groups and Republican states moved quickly to try to block it. The U.S. Department of Education closed its student loan forgiveness portal last week after a federal judge in Texas called Biden’s plan “unconstitutional” and struck it down.

Biden’s plan is also on hold after six GOP-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — asked the courts to stay the policy while its legal challenge against it unfolds.

“Courts have issued orders blocking our student debt relief program,” according to a note on the forgiveness application page at Studentaid.gov. “As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.”
Before the portal was closed, some 26 million Americans had applied for the relief. Under the president’s plan, more than 10 million borrowers were projected to get their entire student loan balance erased.
“The Biden Administration has promised forgiveness to tens of millions of borrowers who will be upset about having to make payments on loans that they expected to be forgiven,” Kantrowitz said.
The White House declined to comment.

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Traders on the floor of the NYSE, Sept. 14, 2022.
Source: NYSE

As we see valuations soften in many parts of the market today, it can feel like an uncertain time for investors, especially in technology. 
However, on close examination, investing specifically in enterprise software will continue to be one of the best uses of capital anywhere in the financial and technology markets. The current environment will likely continue to create opportunities, the same way past dislocations have done. Several factors play into this scenario.

As we have seen, enterprise software is a disruptive force with the potential to unlock unprecedented productivity and innovation. Like the physical assets that propelled the business world in centuries past, software and tech-enabled solutions are transforming the way we live, work and learn, revolutionizing our economy in the process. 
The pandemic accelerated reliance on enterprise software, as companies turned to technology to connect employees and customers, conduct meetings and facilitate payments. This has led to a fundamental shift in business practices and a reprioritization of the expenses that companies consider core to their operations.
The pandemic also set into motion an unprecedented environment for valuations as less selective, inexperienced investors focused on the potential for multiple expansions and short-term returns over the underlying quality of companies. At the same time, many general partners sacrificed discipline to chase frothy valuations, rapidly increasing their deployment pace and exhausting funds over a small window of time. I suspect those who took this approach may have left themselves overly exposed to changes in the market.

Not all technology is created equal

Not all technology is created equal. Consumer software is subject to individuals’ spending habits, which naturally tighten during inflationary times.
Conversely, as more businesses face commodity and wage inflation, they recognize the value that enterprise software can deliver to help manage the cost of day-to-day workflows while increasing efficiency. Businesses will continue to implement software that directly enhances their operations – in areas such as business continuity, data protection, secure remote access and automation. We can already see this dynamic at play as consumer-driven stocks have been harder hit than their B2B counterparts.

According to an Evercore ISI study, 92% of respondents are expecting to increase their IT spending over the next six to nine months – up from their January survey (83%). This indicates that IT spending is less discretionary today than in previous cycles. As a result, it’s expected that software will continue to be the fastest-growing sector in the economy with a market capitalization of $34 trillion by 2025, Vista Equity Partners found.

Private markets advantages and enterprise software

Shifting economic conditions do not change the structural advantages of investing in the private markets, particularly within enterprise software, where about 97% of companies are private, according to Vista. The public markets often hold even the most dynamic and visionary founders and CEOs to impossible timelines and unrealistic quarterly expectations. They demand short-term growth at all costs.
Conversely, privately held companies benefit from patient, strategic ownership where they can implement operational best practices with an eye toward sustainable, long-term value creation.

Selecting the right investments

That said, even in the private markets, generating favorable outcomes in turbulent times requires investors to execute against two factors.
First, they must know what to buy. Second, they must understand how to scale an organization. It sounds simple, but in a changing valuations environment determining a fair price requires a discerning eye, rigorous due diligence, and unwavering discipline.
It means knowing the difference between a fundamentally sound company versus a business that might look promising but is loaded with less obvious issues like technical debt, which can slow – or jeopardize – the integrity and growth of software and therefore an investment.

A partnership with private capital

Beyond asset selection, a true partnership approach between an investor and a founder or management team must exist to ensure an investment reaches its full potential. Investors with experience and expertise in the industry understand how software companies operate, the systems needed for success, what makes a successful management team and how to scale and grow these businesses. They can help the management team enhance their position by accelerating operational excellence, identifying M&A opportunities, investing in product innovation and enabling a path for sustainable growth.
On the flip side, there is no replacement for a founder’s passion, vision and innate understanding of their business. The best investors know how to channel this knowledge and arm the founder with the right tools and processes to thrive. When it works, the positive dynamic is not just felt by those sitting in boardrooms – it’s apparent throughout the whole company, creating a workplace dynamic that cultivates and retains the best talent.
As the digital economy continues to expand, governments and consumers globally have embraced the potential opportunities that technology offers. Enterprise software will be crucial in shaping the future. When partnered with private capital, the result will be a stronger economy with an innovative and adaptable infrastructure — one that’s ready to tackle the challenges of this century and to define the possibilities of the next.
Robert F. Smith is the founder, chairman and CEO of Vista Equity Partners, a leading global investment firm that invests in enterprise software, data and technology-enabled businesses. The firm has over $94 billion in assets under management as of June 30 and a portfolio of 85 companies that serve over 300 million users and employ over 90,000 people worldwide.

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As the Federal Reserve kicks up interest rates, what retailers may charge you for a store credit card is reaching new highs.
Here’s what to think about before opening a new line of credit while shopping this holiday season.

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That offer for a store credit card may sound tempting as you’re shopping this holiday season.
But you may want to think twice before you accept.

As the Federal Reserve raises interest rates, credit card annual percentage rates — a measure for the yearly cost of borrowing money — are climbing higher. That is especially true for retail credit cards, which tend to charge the most.
The most expensive retail credit cards may come with a 30.74% annual percentage rate, according to Ted Rossman, senior industry analyst at CreditCards.com, who calls the rate “crazy high.”
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Meanwhile, the average retail credit card charges 26.72%. Many other cards are charging 29.99%.
Credit card interest rates more broadly recently soared to 19.04%. That rate is the highest since Bankrate.com started tracking them in 1985, according to Rossman.

For retail credit cards, there has long been an unwritten rule among issuers that they will not go over the 30% annual percentage rate, likely for fear of scaring potential customers away, according to Matt Schulz, chief credit analyst at LendingTree.
“Given how quickly the Fed has raised rates and how often, we’re starting to finally see that ceiling crack a little bit,” Schulz said.

Consumers who are grappling with historic high inflation may also be tempted to open these lines of credit to give their holiday budgets some wiggle room. More than a third — 35% — of respondents to a LendingTree survey said they are at least somewhat likely to apply for a store credit card this holiday season, up from 29% a year ago.
But experts say you should carefully weigh the pros and cons before applying.
The value of an offer for 15% to 20% off your first purchase could be overshadowed by a higher annual percentage rate.
What’s more, if you can’t pay off the balance every month, you may be in for some expensive charges on your balance. Plus, there are other factors to weigh when determining whether the rewards will pay off.

1. Consider opportunity cost

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When it comes to retail credit cards, there are generally two kinds: lines of credit that apply to a specific retailer, or other co-branded cards with credit card providers such as MasterCard or Visa that can be used more generally.
For a one-brand card to make sense, it should be a store you frequent often.
“You have to be a regular shopper to make this worth it,” Rossman said.
If you’re making a big purchase, such as buying several new appliances, the discount may be meaningful, so long as you are able to pay off the balance before accruing significant interest charges, Rossman said.
Still, you may want to weigh whether the rewards using a more general purpose card may be more generous or better match your spending style, he said.

2. ‘Understand what you’re getting into’

Opening a retail credit card can be a spur-of-the-moment decision when checking out at the store.
But before you accept the offer, you should do some due diligence, according to Schulz.
“It’s really important that you understand what you’re getting into before you apply,” Schulz said.
If the checkout offer sounds interesting, go home and research what it entails, particularly with regard to interest and fees. Then, if you still want it, you can still apply for it the next time you’re in the store.
That way, you’ll be making a more informed choice and be less likely to regret your decision, Schulz said.

3. Be wary of deferred interest

As inflation continues to surge, hitting 8.5% in the U.S. in March, it’s important find ways to protect your savings.

Some store credit cards offer what is called deferred interest, with a 0% introductory rate.
Notably, if that term expires and you have an unpaid balance, the credit card company can go back and charge you for all of the interest you would have accumulated, Rossman noted.
“Be especially wary if a store card is offering a deferred interest promotion,” Rossman said. “That retroactive interest can really hit you.”

4. Tackle unpaid debts

It’s not only new retail cards that are charging higher interest rates. Borrowers with existing retail credit cards may also see the rates they are charged go up soon, Schulz said.
As interest on unpaid debts also kicks up more generally, credit card holders would be wise to take a few steps to reduce their burdens.
First, strive to pay down as much of those balances as you can, according to Schulz.
Next, consider a 0% balance transfer card.

People don’t realize how good their chances are of getting their rate reduced.

Matt Schulz
chief credit analyst at LendingTree

“It may be the best tool that you would have in your tool belt for fighting credit card debt, because it can give you up to 21 months without accruing any interest,” Schulz said.
Those offers may not be as generous as the lending market tightens, which may include higher one-time balance transfer fees or shorter durations for the 0% rate, Schulz said.
Finally, try simply asking your current lender for a lower annual percentage rate.
A LendingTree survey from earlier this year found 70% of those who tried this were successful. But the key is you have to try, Schulz said.
“People don’t realize how good their chances are of getting their rate reduced if they just take the time to call,” Schulz said.

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Investors purchased nearly $7 billion in Series I bonds in October, according to the U.S. Department of the Treasury.
If you’re one of the masses of new I bond owners, there are a few things to weigh before cashing in your assets, experts say.

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If you’re one of the masses of new Series I bond owners, there are a few things to weigh before cashing in your assets, experts say.  
Investors purchased nearly $7 billion in I bonds in October, according to the U.S. Department of the Treasury, with $979 million flooding into I bonds on Oct. 28, the deadline to lock in 9.62% annual interest for six months.     

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You can’t access the money for at least one year and there’s a penalty for redeeming I bonds within five years. If you cash in your I bonds before that five-year mark, you’ll lose the previous three months of interest.  
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“Most October I bond purchasers should not cash out until January 2024,” said Jeremy Keil, a certified financial planner with Keil Financial Partners in Milwaukee.
For example, if you bought I bonds in October, you can earn a full year of interest, taking into account the three-month penalty for withdrawal before the five-year mark, by waiting 15 months (rather than just 12) until January 2024 to redeem.

However, depending on future I bond rates — compared to other options for cash — it may be worthwhile to keep your I bonds beyond just one year and three months, Keil said.

“You should only cash out when you don’t like the interest [rate],” he said. Of course, you’ll want to consider your goals, risk tolerance and timeline for the money when deciding whether to redeem.

How I bond interest rates work

Backed by the U.S. government, I bonds don’t lose value and earn monthly interest with two parts: a fixed rate and a variable rate. The fixed rate may change every six months for new purchases but stays the same after buying, and the variable rate shifts every six months based on inflation. 
While the Treasury releases new rates every May and November, the variable rate depends on your purchase date. Although the annual rate changed to 6.89% on Nov. 1, you could still have secured the previous 9.62% rate for six months by purchasing by Oct 28.

For example, if you purchased I bonds in October, you’ll receive 9.62% annual interest for six months. In April 2023 you’ll start earning 6.89% annual interest for the next six months.
Twice per year, the Treasury adds interest earned from the previous six months to your original investment.
However, if your I bonds are less than five years old, the value in TreasuryDirect excludes the previous three months of interest, explained Jonathan Swanburg, a CFP at Tri-Star Advisors in Houston.

Why it’s better to redeem early in the month

As you weigh when to redeem your I bonds, you’ll also want to consider the timing within the month.
If you purchased I bonds near the end of October, you get credit for the full month, Swanburg said, meaning you can cash out as early as Oct. 1, 2023 next year.
What’s more, “I Bonds only accrue interest on the first day of the month,” Swanburg said, so there’s no benefit to cashing out later in the month.

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