Why Suze Orman Says This Piece of I-Bond Advice Is '100% Incorrect'

One of the best things about personal finance guru Suze Orman is that she doesn't mince words. When Orman has an opinion, you know about it. So when a listener recently asked her whether it was time to sell the I bonds they purchased last April, Orman was quite clear in her reply:

"That is 100% incorrect advice."

Orman says definitely don't sell I bonds yet

In true Orman fashion, of course, her opinion was actually a bit more enthusiastic than just that:

"I don't know where you read that you should get out of I bonds now," she told her listener, "But wherever you read that, can you do me a favor? If it's an email or a text, block them from you. If it was a newspaper article or a magazine, never read that publication again."

While Orman seemed somewhat flummoxed as to why someone would consider selling I bonds right now -- especially I bonds purchased last year when rates peaked -- it does make a certain sense. Current I bond rates are significantly lower than the highs from last spring. Simultaneously, other rates, like those on short-term CDs, are going up. Even high-yield savings accounts can give you a remarkable return right now.

But, as Orman reminded her listeners, the money you already have in I bonds is still compounding. And the rate at which it is doing so is nothing to scoff at. So it makes sense to keep your money where it is -- especially since you'll likely lose money if you sell right now.

I bonds have penalties for selling too soon

If you, like Orman's listener, were one of the many folks who purchased I bonds at their prime last year, then I agree with Orman 100%: Cashing out now would be a huge mistake.

There are two key rules about I bonds that you always need to remember:

1. You can't cash out an I bond at all within the first 12 months.
2. If you cash out within the first five years, you forfeit the last three months' worth of interest.

Rule No.2 is what you really need to focus on when you think about, "Is it time to cash out my I bonds?" Because if you haven't hit that five-year mark, cashing out comes with a pricey penalty.

If your bonds are less than five years old and you're thinking about cashing them out anyway, make sure you look to see how much interest you'll be losing. Even with current rates much lower than last year, it could be a significant sum -- particularly since that interest has been compounding on top of the interest you earned when rates were higher.

When will it be time to sell? Orman promised she'd tell her listeners if they just stay tuned. Otherwise, just wait until the math tells you it's worthwhile. The numbers always know.