The internet is filled with dubious investment schemes. One simple way to invest in a safe and secure way is through the purchase of US Savings Bonds. The yield is usually not as good as with many other investment options, but US Savings Bonds are safe and the costs are minimal.
If you have a question about a Savings Bond that you already own, or if you are interested in finding out more about US Savings Bonds, the web site http://www.savingsbonds.gov/ provides comprehensive information on Savings Bonds. Look there first for the most authoritative information on the subject.
You may choose between EE Bonds, I Bonds and HH Bonds. The following table compares some of the features of each. For more information, be sure to browse the above web site.
| Feature | E/EE | I | H/HH |
|---|---|---|---|
| Purchase price | 50% of face value | Sold at face value | Sold at face value |
| Face values | $50 - $10,000 | $50 - $10,000 | $500 - $10,000 |
| Maximum purchase | $15,000/yr | $30,000/yr | no limit |
| Interest paid | 90% of average 5yr treasury note | Fixed rate + Inflation | Fixed rate |
| Current rate | 4.5% | 3% + 1.42% | 4% |
| Penalty | Penalty if held < 5 years | Penalty if held < 5 yrs | Must hold for 6 mos. |
| Fed Taxes | Interest subject to Fed tax at redemption. | Interest subject to Fed tax at redemption. | Interest subject to Fed tax in year earned but this tax may be deferred until redemption. |
| State & Local Taxes | none | none | none |
| How is interest paid? | Increase in redemption value | Increase in redemption value | Direct deposit every 6 mos. |
The US Government provides for regular, automatic purchase plans at no additional cost to you. Warning - interest does not accrue after the 30th year (20 yrs for HH). Be sure to redeem your bonds before they mature.
You can purchase or redeem US Savings Bonds at most financial institutions or directly from the US Treasury Department. You can redeem Savings Bonds at any time (subject to the penalties shown in the above table).
As an alternative, be sure to consider the purchase of Treasuries. For more information, go to http://www.treasurydirect.gov/.
This article first appeared in the June,2001 Issue of the Orange Bytes.
It may also be viewed at www.tlwilliams.net (article 01016a)
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Last update: June 5, 2001