US Savings Bond

US savings bonds are investment vehicles that the federal government offers to the public. In this article, we will go over the basics of what you need to know before investing in US savings bonds.

The Basics

The government offers US savings bonds to the public as a way to fund federal spending. In return for the loan, the government guarantees a percentage of return on the amount invested. The pay date of this return is set at the time of purchase. This is the maturity date.

Features

US Savings bonds are non-marketable. This means you can only purchase them directly from the government. This also means you cannot sell the bond to another investor. You can purchase bonds in penny increments anywhere between $25 and $10,000. You can only purchase bonds through the TreasuryDirect website.

These types of bonds are zero-coupon bonds. This means that you only receive interest upon redemption or the maturity date. You can only redeem your bond after you have held it for at least 12 months. It is important to note that if you redeem your bond within the first 5 years you will forfeit 3 months interest as a penalty for early withdrawal. Taxes on interest are only due at the federal level. It is not subject to state or local taxes.

Types of US Savings Bonds

There are two types of US savings bonds. The first is Series EE. These have a fixed maturity rate. You will receive interest upon the maturity of the bond or at redemption. The second is Series I. These pay adjusted interest rates that change with inflation or deflation. However, there is a guarantee that the rate of return will never drop below 0%.

Purchasing a US Savings Bond

If you feel like US savings bonds are a good fit for your investment portfolio you can purchase them at treasurydirect.gov. If you are unsure, if they would be a good fit, meet with a qualified investment planner who can analyze your portfolio.

Questions? Want to schedule an appointment? Contact us by clicking here.