I Bonds vs TIPS: Which Inflation-Protected Investment Is Better?

With inflation a concern in 2026, investors look at inflation-protected securities. The two main options are I Bonds and TIPS, each with distinct advantages.

How I Bonds Work

I Bonds combine a fixed rate plus a variable inflation rate, adjusting every six months. Buy from TreasuryDirect.gov with a $10,000 annual limit. They never lose value.

How TIPS Work

TIPS are Treasury securities whose principal adjusts with the CPI. No purchase limit, tradeable on secondary markets, but can lose value if rates rise.

Key Differences

I Bonds: $10K limit, 1-year hold minimum, tax-deferred. TIPS: unlimited, liquid, taxed annually on inflation adjustment. I Bonds guarantee principal; TIPS do not.

The Optimal Strategy

Max out I Bonds first for guaranteed protection, then use TIPS ETFs (TIP, SCHP) for additional inflation coverage in your portfolio.

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