For a couple years I’ve been saying I Bonds are a good option for “keep-safe” funds, but some folks have been writing in wondering whether that’s still true now.

Since the U.S. Treasury just released the new six-month rate on these bonds, this is a good time to revisit the issue.

I Bonds are still a good buy at the new

interest rate.

Much like traditional Series EE bonds, they can’t be bought or sold to other investors.

But UNLIKE series EE savings bonds, they pay interest is comprised of two components: A baseline interest rate and an inflation adjustment.

The baseline rate sticks with an I Bond for its entire 30-year lifespan and is still set at zero for new bonds.

The inflation adjustment — which is determined twice a year on May 1 and November 1 — is based on changes in the Consumer Price Index (CPI) for the prior six months.

The NEW rate, which was just announced last week, is 1.18%, or 2.36% on a yearly basis.

So if you buy an I bond between now and the end of October 2013, you will earn a return of 1.18% for your first six months of ownership …

After the first six months, you will earn whatever the next six-month inflation yield is …

And this will continue until you decide to cash in your bonds.

So How Do I Bonds Stack Up to the Other Choices?

Obviously, I still prefer high-quality dividend stocks for the best combination of income and safety.

They can immediately hand you yields that are three, four, or five times higher than the current I Bond rate.

Better yet, whenever a company boosts its dividend payment, your effective yield goes even higher!

This is precisely why dividend-paying stocks will remain my primary focus in Income Superstars .

It’s also why I just launched my Instant Dividend Club … to help investors go one step further and collect a whole additional stream of steady income from dividend stocks and other investments.

At the same time, I always recommend keeping some money in cash-like investments such as money market funds or certificates of deposit.

But according to Bankrate.com, even so-called “high-yield” 1-year CDs — which often require bigger minimum deposits — are currently only paying about 1% a year in interest.

So just the first six months of holding an I-Bond will hand you more money than you’d get by holding the very best CDs for an entire year!

Plus, with I-Bonds you get additional advantages:

Advantage #1: Your interest is exempt from state and local taxes.

So depending on what state you live in, this could further widen the amount of money you end up walking away with on your initial investments.

Advantage #2: Under certain circumstances it is also possible to avoid federal taxes.

If you use the proceeds from your I-Bonds to fund qualified education expenses, you don’t have to pay Uncle Sam anything.

Advantage #3: You actually get BETTER protection against losses.

As I mentioned earlier, I-Bonds aren’t marketable securities. That means their value doesn’t fluctuate. So you can’t really lose anything.

And since they have the backing of the U.S. government, they are more directly backed than the FDIC or NCUA insurance that covers certificates of deposits issued by banks or credit unions.

However, There ARE a Few Caveats …

Perhaps the most important thing to know is that you MUST hold an I-Bond for at least a year before you redeem it. So they are clearly not ideal for your immediate emergency funds.

Beyond that restriction, you will forfeit the most recent three months of interest if you cash in I-Bonds during your first five years of ownership.

I don’t consider that a huge deal … especially since you’d probably still come out with more interest than from other alternatives. Besides, most CDs also carry early-redemption penalties.

Another fine-print detail is the fact that you can only buy $10,000 worth of electronic I-Bonds per social security number.

Also, paper I-Bonds are no longer available from brick-and-mortar financial institutions. In fact, the only way you can still buy new paper I-Bonds is by using your IRS tax refund — and in this case, the limit is $5,000.

But in the end, yes, I still think I-Bonds are a good choice at the new rate … and my own household will continue to hang onto the ones we bought a few years ago.

For more information, or to buy some for yourself, just visit www.treasurydirect.gov.