US Savings Bonds
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US savings bonds are often thought of as a poor man’s route to savings. Many aggressive investors and traders scoff at the idea of buying US savings bonds every payday and holding them for as long as thirty years. However, there are a number of advantages to buying and holding US savings bonds. As with all investment opportunities a little fundamental analysis of the subject is useful. So before comparing US savings bonds to dividend stocks, US Treasuries, or municipal bonds let us look at a few specifics about US savings bonds.
2. US savings bonds are often thought of as a poor
man’s route to savings.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
3. Many aggressive investors and traders scoff at the
idea of buying US savings bonds every payday and
holding them for as long as thirty years.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
4. However, there are a number of advantages to buying
and holding US savings bonds.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
5. As with all investment opportunities a little fundamental
analysis of the subject is useful.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
6. So before comparing US savings bonds to dividend
stocks, US Treasuries, or municipal bonds let us look
at a few specifics about US savings bonds.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
8. These bonds are available in Series EE and Series I.
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9. Electronic series EE bonds are purchased via a
Treasury Direct account for face value and paper
series EE bonds are purchased at their face value.
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10. One earns a fixed rate of interest for the thirty year
term of the bond.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
11. The treasury guarantees that the bonds will double in
face value in twenty years.
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12. Series I bonds sell at face value at interest rates
guaranteed to exceed that of inflation.
These bonds are not tradable.
The maturity periods can vary. For example, if you buy a
bond with a value of $50 for $25, you'll have to wait at
least 17 years to get back your investment from the
government.
US savings bonds are exempt from state and local
taxes.
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13. Federal tax is deferred until the bond is cashed in.
Interest may be tax exempt if you can document that
interest was used to pay qualified higher education
expenses and provided that your income falls within
federal guidelines for this benefit.
http://www.profitableinvestingtips.com/bondinvesting/us-savings-bonds
14. As with many long term investments you will
commonly cash in US savings bonds when you are
retired and when your tax rate is low.
US savings bonds pay interest twice a year and are
redeemed at par value at maturity.
Savings Bonds come in eight values: $50, $75,
$100, $200, $500, $1,000, $5,000 and $10,000.
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15. Why Purchase US
Savings Bonds?
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16. There are certainly lots of investments that can make a
lot more money over the years than US savings
bonds.
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17. And there are lots of investments that can disappear in
a puff of smoke during an economic downturn.
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18. US savings bonds are like money in the bank. A good
rule of thumb for investing is to first pay off credit card
debt, invest in your home, and put six months of
savings away for emergencies.
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19. Think of US savings bonds in this context.
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20. US Savings Bonds
versus Municipal
Bonds
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21. Like municipal bonds, US savings bonds are free of
state and local taxes.
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22. Unlike municipal bonds US savings bonds are less
likely to default than when cities like Detroit declare
bankruptcy.
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23. US Savings Bonds versus Dividend Stocks
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24. Dividend stocks are a common way to balance the risk
in an aggressive stock portfolio.
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25. However, even large cap stocks call fall in price or fall
out of favor.
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26. When markets are falling US savings bonds still
maintain their value and pay interest.
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28. Bonds are purchased with a Treasury Direct account.
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29. For such an account you need a social security
number, a driver's license, a checking or savings
account, and an email address.
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30. According to the US Treasury site:
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31. Minimum Purchase: $25
Maximum Purchase: $30,000 per person per year
Interest: 90% of 6-month average of 5-year Treasury
security yields, added monthly and paid when the
bond is cashed
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32. Minimum Term Of Ownership: 12 months
Early Redemption Penalty: Forfeit three most recent
months' interest if cashed before 5 years
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