I-bond rate to hit rock bottom. Buy now?

When to buy

You would get the current 5.64 percent annualized rate for the first six months of ownership. For the second six months, you'll get whatever is issued May 1 -- presumably 0 percent. I-bond rules state that you must hold the bond for 12 months prior to cashing, and that you'll pay a penalty of three months' interest if you cash out before five years. It's the last three months of interest that would be deducted which, in this case, would be zero. Therefore, you'd receive 2.82 percent for holding the current bond for one year. If that beats your CDs and money markets, it may be worthwhile.

If you think plenty of inflation is coming down the pike and you want to hold an I bond for more than 12 months then buy now. You'll lock in the 0.7 percent fixed rate and get the presumably higher inflation adjustments in the years ahead. Steer clear of the May bond, unless for some reason you're sure the government will raise the fixed rate.

The other savings bond rate that's adjusted on the same timetable as the I bond is the Series EE bond. Pederson says he doesn't think it'll move more than 30 basis points up or down from its current 1.3 percent. The EE's rate is fixed for life and it has no inflation component.

Pederson says the I bond is a better long-term buy than the EE.

*The announced fixed and inflation components don't quite add up to the composite rate because of the way the composite is calculated.