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U.S. Savings Bonds

By: Source: AARP.org Date Posted: 2004-03-05 15:11:00-05:00

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U.S. Savings Bonds have been around since 1935. Bonds may seem a bit old-fashioned, but they do have advantages. They're familiar, they can help you save over the long term, and they carry no risk.

More than 55 million Americans currently own 800 million U.S. Savings Bonds worth $186 billion. Savings Bonds come in small or large denominations. They don't require high minimum balances and are backed by the full faith and credit of the United States.

Interest on Savings Bonds is usually paid to you when you redeem your bond. At that time, you'll also pay income taxes on the interest you've earned. Bond interest is free from state and local taxes.

Series EE Bonds

EE Bonds come in denominations ranging from $50 to $10,000. These bonds are sold at 50 percent of face value. This means that you pay $50 for a $100 bond. EE Bonds reach their face value in 17 years and earn interest for 30 years. The interest on these bonds equals 90 percent of the yield of a 5-year U.S. Treasury Security.

Series HH Bonds

The Treasury Department announced on February 18, 2003, that Series HH Savings Bonds will no longer be offered to the public after August 31, 2004. Owners of Series E or EE bonds, however, will be permitted to exchange their bonds for Series HH bonds until August 31, 2004.

HH bonds are current-income securities that pay interest to their owners semi-annually. The current annual interest rate paid on new HH bonds, or HH bonds entering a 10-year extended maturity period is 1.5 percent.

Learn more about the cancellation of the Series HH Savings Bonds from the U.S. Treasury.

Series I Inflation-Indexed Bonds

The I Bond comes with a guarantee that its interest rate will keep up with inflation for 30 years. These bonds are sold at face value. The earnings rate of an I Bond is a combination of two separate rates: a fixed rate of return and a variable semiannual inflation rate. The fixed rate remains the same throughout the life of the I Bond. The semiannual inflation rate can change every six months.

You Can Buy U.S. Savings Bonds:

• Through a payroll savings plan at work.

• At certain financial institutions.

• Online through the Bureau of the Public Debt
URL:http://www.publicdebt.treas.gov/bpd/bpdhome.htm

• Through the bureau's new EasySaver Program
URL: http://www.treasurydirect.gov/RS/BPDLogin?application=rscreate&page=rscreate

Safe Storage and Replacement

Store bonds in a safe, fire-protected place like a bank safety deposit box. In a separate place, record information about your bond. Include the Social Security number listed on each bond, and the bond's serial number, face value, and issue date. The Bureau of the Public Debt will replace lost or stolen bonds, but you must provide this information first.

Cashing in Old Bonds

Many bond owners forget to cash their bonds, even after those bonds have stopped earning interest. If you have bonds you think have stopped earning interest, you should redeem them right away or convert them into other investments.

For More Information

Savings Bonds Home Page

You can find a host of information about Savings Bonds at the Savings Bonds Home Page. Topics on the page include product information for all types of bonds, ways to buy bonds online, and information about why and how to buy bonds. You can also find out what your bonds are worth, and how to cash or report lost bonds. There are even fun and games for children.

URL: www.savingsbonds.gov

Consumer Information Center

The Consumer Information Center in Pueblo, Colorado has published two brochures about U.S. Savings Bonds. You can read both brochures on line.

U.S. Savings Bonds is a general information brochure about U.S. Savings Bonds. The brochure discusses the benefits of bonds and how to purchase them. It also focuses in on Series I and Series EE Bonds.

URL: http://www.pueblo.gsa.gov/cic_text/
money/bonds/bonds.htm

Invest Today -- Enjoy Tomorrow provides more in-depth information about Savings Bonds. It contains information about Series EE and HH Bonds, and discusses tax and other benefits of savings bonds. It also provides information on regulations that affect savings bonds.

URL: http://www.pueblo.gsa.gov/cic_text/money