U.s. Savings Bonds Explained

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A savings bond is a bond that is issued by the federal government as a method to save money. Savings bonds have two main purposes. First, to allow people to save money while receiving a guaranteed return on their investment, as well as securing money for the government. Two types of U.S. Savings Bonds exist, the Series EE and the Series I. The Series I bonds have interest rates that have been indexed to inflation. Bonds must be held for at least five years in order not to incur a redemption penalty, and mature after thirty years.

Savings bonds cannot be traded, but instead must be turned back into the government for redemption. Federal taxes aren't required to be paid on the interest until the bond has matured or until you redeem it. Series EE bonds may be purchased directly from a Treasure Direct account, with electronic Series EE available at face value and paper Series EE bonds available for half of their face value. These bonds will earn a fixed rate of interest, that allows the bond to double in value in twenty years. The Series EE bonds however, that were issued before 2005, earn variable rates set two times annually. ...
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As for the Series I bonds, they can be purchased at face value, and earn a rate of return that is guaranteed to be greater than the rate of inflation during the period that the bond matures, which means that you will be guaranteed to get a return. There is also another type of bond called Series HH, which earn interest all the way to maturity but these bonds are no longer issued. Savings bonds cannot be traded among investors but instead must be purchased either in your name, or in the name of a friend or family member for a gift.

You will be required to pay taxes on the interest once the bond has matured or cashed in, but there may be exceptions if you are going to use the bond money for educational purposes. Savings bonds U.S. Savings Bonds may be purchased at most financial institutions such as banks or credit unions. There may be more options for payroll purchase plans as well. Any U.S. Citizen may own a savings bond and you can request that they be issued to you, or they can be co-owned. Also savings bonds may have someone else named as the beneficiary.

Savings bonds can be a great investment if you choose to do things that way, but there are many investment types to be considered. Contact a professional investment adviser to determine which investments will work the best for you, whether it be stocks, real estate or U.S. Savings Bonds. Only a financial expert will know what sort of investments will be the best one for you.

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