US Savings Bonds
A Safe Investment

Savings bonds are a safe way to invest some money for the future. A bond is a piece of paper that shows a person has agreed to loan money to the U.S. Government. The money you give to the government helps pay bills and programs that the United States runs. The government then pays you back with interest. Interest paid on these bonds is exempt from state and local income taxes.

There are two primary types of bonds; “I” bonds and “EE” bonds. With “EE” bonds you buy the bonds at half the face value and they gain interest over time. (For example a $100 bond will cost $50.) You can also buy them electronically online for face value. It will mature to the face value at 20 years but can still continue to gain interest for ten more years for a total of 30 years. “I” bonds are issued at face value and will also gain interest over time.

If you are a U.S. citizen and over 18 years old you can buy savings bonds. You can buy Series “EE” Bonds and Series “I” Bonds from most banks or credit unions where you live. You will fill out the purchase form and the bank will send them to the Treasury and you will receive the bonds in the mail a few weeks later. Some employers will allow you to purchase bonds through a payroll deduction. You can also go online and setup an account and buy savings bonds through the treasury department ( Bonds bought online are bought at face value. (Ex. $100 bond costs $100 to purchase)

Series “EE” and “I” Bonds come in denominations of $50; $75; $100; $200; $500; $1,000; $5,000; and $10,000. You can buy up to $30,000 of Series “EE” and “I” bonds per person in a calendar year.

At the time of purchase, a bond can be registered to a single person (“single ownership”), registered to two people (“co-ownership”), or can be registered to a primary owner and a beneficiary (“beneficiary”). In co-ownership either of the named individuals can do whatever they like with the bond without consent of the other person. With a beneficiary registered bond, the primary owner controls the bond, and ownership passes to the beneficiary if the primary owner dies.

With “EE” and “I” Bonds you have the choice to declare the gained interest each year or defer it until you cash it in. Savings bonds can be cashed in at many banks and credit unions. Call your banking institution ahead of time and ask if you will have to bring in any documentation. You can also redeem your bonds through the mail, on the web, or at a local branch of the Federal Reserve Bank. You can cash in bonds anytime after 12 months of the issue date. “I” Bonds cashed within the first five years are subject to a penalty of three months worth of interest. This is to encourage long-term investing.

The main difference between “I” bonds and “EE” bonds are the rate. “I” bonds have a fixed base rate and earn additional interest based on the current inflation rate, which is calculated each month. (The current rate at time of publication for an “I” bond was a fixed base rate at 1.20% and a composite rate of 4.80%.) The interest rate for an “EE” bond is good for 20 years. The Treasury can set a new rate for the last 10 years of the bond’s 30-year life. (The current rate at time of publication for an “EE” bond was 3.50% for 20 years).

If your Savings Bonds are lost, stolen, mutilated, or destroyed they can be replaced. You need to contact the Department of Treasury and provide them with as much information possible. Have a copy of the serial numbers, the issue dates, denominations of the bonds, and know the name and social security number of the owner of the bonds. The more information you can provide the faster they will be able to replace your bonds.

Bonds make great gifts for children. A bond can be bought when a child is born and will grow with the child. They can also be purchased for birthdays, weddings, graduations, or any other special holidays. Check with your banking institution on what type of bonds they can help you with.

Helpful Resources:
Official site for US Savings Bonds. Has a lot of useful information.
Includes information on savings bonds and branches of the Federal Reserve Bank.
Provides information on how best to invest in savings bonds and to help you understand better.
A free downloadable program to help you manage your own Savings Bond inventory.

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