Why should one purchase U.S. savings bonds? If patriotism is not reason enough, rest assured that there are tons of other reasons. First of all, savings bonds are extremely safe. They are fully backed by the US government. The money you spend on a bond will always sustain its value. Another reason involves the competitive interest rates. The bonds that are available for sale are Series I and Series EE, and their rates are excellent. They change twice a year.
The US government will not charge taxes on the interest these financial instruments earn. The interest is sometimes exempt from taxes if you use the bonds to pay tuition. It is easy to acquire Series I and Series EE bonds. First, you can get them from the company you work for. They can be bought through company savings plans. You can also buy them from banks and credit unions or directly from the U.S. Department of the Treasury. If you are interested in the last option, you will have to open an account with the Treasury and set up electronic savings after verifying all automatic deductions from your account, whether it is a checking or a savings account.
The process of buying savings bonds is fast and easy. It won’t take you more than 10 minutes if you are internet-savvy. Once you have opened an account, you have to fill out some personal information an link your TreasuryDirect account to your personal bank account. After you log-in, you have access to a large variety of treasury securities. You will even find a ‘purchase express’ form on the website. Just enter the type of bond you want to buy, together with a dollar amount, and you are done. As with other financial instruments, you will be wise to read the fine print. Check the cash-out penalties and minimum holding periods for every stock type you consider buying. This will help you manage saving bonds well.
Series I bonds date from 1998. They were established to stimulate Americans to save money. Not only do these bonds offer competitive interest; they also protect against inflation and are indexed on the basis of the Consumer Price Index. Your interest accumulates and no tax is charged until you choose to redeem the value of the bond.
As for Series EE, it offers a fixed rate. The rate is adjusted in accordance with the 10-year Treasury average for the previous month. The interest is tax-deductible as well. The rate is slightly lower than that of Series I, with most other terms and conditions being equal.
Another slight difference is that I bonds are issued at full face value and EE are issued at half the face value. This means that with the former, a hundred dollars will get you a one-hundred dollar bond. With the latter, fifty dollars will get you a one-hundred dollar bond.
Not all companies have set up savings plan for staff to buy U.S. savings bonds out of payroll deductions. If your employer is among those that have failed to do so, he should seek assistance from the four specific Federal Reserve banks, appointed by the Treasury as savings bond processors.
How are U.S. savings bonds redeemed? You can cash them in at almost every bank or credit union. As of 2003, I and EE bonds must be retained for a period of one year before they can be redeemed. Previously the period was half that.
Another detail pertaining to EE bonds is that they are sold at face value online. The 50 percent of face value rule applies to paper bonds only.
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