Suze Orman Has a 'Serious' Amount of Money Invested in This One Thing

Was it true love or mere infatuation?

Suze Orman isn't one to hold back what she has to say. Indeed, forthrightness has been a cornerstone of the personal finance guru's brand. 

So it's no surprise to learn that the expert waxing poetic on I bonds for the last year -- let's not forget everyone's favorite holiday gift! -- does, in fact, "have a serious amount of money in there." What's more, she's been at it a while, adding that some of her I bonds are "over 20 years old."

What is a surprise -- or at least a change? She's now saying it might be time to reconsider your next I bond purchase. "I'm not the lover that I used to be of Series I bonds," she admitted in a recent podcast episode. "I'm so sorry, Series I bonds."

The renaissance of I bonds

Series I savings bonds -- called I bonds for short -- are issued by the U.S. Treasury department. Like most savings bonds, they pay out interest until they mature (in this case, the lifetime is 30 years). What makes I bonds different from other bonds is the way that interest rate is set.

I bonds have a two-part rate: the fixed rate and the inflation rate. The fixed rate is set when you purchase the bond and never changes. (It's currently at 0.4%.) 

An I bond's inflation rate, on the other hand, is variable and changes every six months (the new rate is set every May 1 and Nov. 1). The inflation rate is based on the Consumer Price Index. In other words, when inflation is high, this rate is high. When inflation is low, an I bond's inflation rate is low.

This last bit is the interesting part. While inflation was hitting highs last year, I bonds had a rate of 9.62%, making I bonds a hot commodity.

The cooling I bond ardor

Like Orman, many are starting to cool on I bonds. At first glance, it's easy to blame it on inflation; as inflation decreases, I bond rates are also dropping. But it's a little more involved than that, at least for Orman. 

It seems her main concern is more that I bonds are long-term investments (you can't redeem at all in the first year, and you'll pay penalties if you redeem before the five-year mark). Between inflation and the ever-changing interest rates, tying up your funds for five years may not make the most financial sense for most folks.

She says that if you have some cash you don't need to access in that time, I bonds could be good to pick up before the next rate reset. But if you might need that money -- if it's your emergency funds, for instance -- you may need to steer clear.

What does she suggest instead? Short-term solutions like CDs (certificates of deposit) and savings accounts.

"I'd rather see you go into a three-month, six-month certificate of deposit or Treasury bills. Or even into a high-yielding savings account," she says. "But be careful when it comes to I bonds because of the five-year lockup period."