Suze Orman Isn't Crazy About I Bonds Right Now. Should You Hold Off on Buying?

Since we all have different goals, it's natural that we have different strategies.

Financial guru Suze Orman has gone cold on I bonds, but what does that mean for you? Should you hold off buying an I bond? I say no, and here's why.

Orman's reasoning

I bonds are designed to protect you from inflation. Better yet, they're backed by the federal government. So why has Orman cooled on these bonds? From what I can gather, it's due to the fact that I bonds paid an annualized interest rate of 9.62% from May to October. From any rational perspective, that's a pretty great rate. However, the annualized interest rate today has dropped to 6.89%.

On her podcast Women & Money, Orman told listeners, "So all of you finally got on the I bond bandwagon. Now, I just want you to slow down with your I bond purchases."

Her reasoning: "We do not know what the interest rates are going to be, come May of 2023.

Why the drop in rate?

With an I bond, you earn a fixed rate of interest. However, to help you stay ahead of inflation, you also receive an interest rate that changes as inflation changes. If inflation is up, I bond rates will also rise. Twice a year, the Treasury Department sets the inflation rate for the next six months.

While inflation was scorching hot last spring, it appears to be cooling a bit. That means the inflation rate set by the Treasury for this period is also cooling.

Why I don't think you should hold off buying I bonds

I typically agree with much of what Orman has to say, and when our opinions differ, it appears to be due to a difference in circumstances. For example, Orman famously says that parents should not prioritize saving for their children's education over saving for retirement, and I get her point.

The problem is this: My husband and I purposely brought only two children into the world because that's the number of kids we estimated we could send to college while also saving for retirement. Granted, our retirement savings took a hit while we were getting them through school. But today, because we were still young when they graduated and became established, we're able to double down on retirement investments.

It was a personal choice, based upon our values and what we wanted for our kids. Orman has never had children, and while she can theoretically approach the subject, she can't imagine what it is to love a child too much to allow them to do without.

But back to the issue at hand. My point is that I have nothing but respect for the work Orman does. I just can't always agree with her.

Here are three reasons why I'm still wild about I bonds.

1. Balance matters

Let's face it, if it's not in 2023, a recession will occur at some point. It's not because the sky is falling. It's because that's the way the economic cycle works. The U.S. has experienced a recession roughly every seven to 10 years. Although it was never easy, we've made it through each of them.

In fact, recessions are so much a part of the economic cycle that we know to plan for the next one. And for me, planning for a recession means including I bonds to balance whatever else is going on in my portfolio.

While most of my investments are getting sucked into the black hole of recession, I can focus on the unsexy -- but secure -- places I've stored money.

You'd better believe that when the next recession hits, I'm going to remind myself that some of my money is perfectly safe. And then, because the average recession lasts 10 months, I'm going to begin marking off the days.

2. It's not your entire portfolio

Everyone has a different risk tolerance. My husband and I take a few more risks than the average person, not only because we want to get caught up, but because we both want to continue working past the time most of our friends retire.

And because we do take some risks, I want to make sure we maintain a percentage of risk-free investments. I can see recommending that people lay off I bonds if their entire portfolio is made up of low-risk/low-reward investments. But since they make up a small portion of our portfolio, I'm not giving them up every time the rate dips.

3. It's not forever

I'm not someone who wants to "chase" returns or spend my days poring over how my portfolio is performing. Not only would it make me anxious, but I fear it would also lead to some pretty bad decision making.

Nothing lasts forever. Rates rise and they fall. I would rather set my portfolio, make adjustments when they are clearly needed, and let it take the wild ride through those bull and bear markets.

Is now the right time for you?

The average money market or high-yield savings account currently pays an APR of between 2% and 4%. And to earn the higher rate you'll need to make a hefty deposit into that account. With an I bond, you're in charge of how much you invest, from as little as $25 to as much as $10,000 (and up to $5,000 more with your tax return). You're promised the same interest rate no matter how much you spend.

Given what we've been through recently, an interest rate of 6.89% is nothing to sneeze at. If it feels right to you, I say go ahead and add an I bond to your portfolio.