A brief description of savings bonds follows:
Savings bonds are issued by the U.S. Treasury Department. They are non-marketable securities. This means you may not sell savings bonds to or buy them from anyone except an issuing and redeeming agent authorized by the Treasury Department. Savings bonds are registered securities, meaning that they are owned exclusively by the person or persons named on them.
I Bonds and Series EE Savings Bonds are accrual securities. They earn-accrue-interest monthly at a variable rate and the interest is compounded semiannually. You receive your earnings when you redeem an I Bond or Series EE Savings Bond.
Series HH Savings Bonds are current income securities. You receive your earnings semiannually and you receive the face value of Series HH Savings Bonds when you redeem them.
Attractive interest rates. The I Bond tracks inflation to prevent your earnings from being eroded by a rising cost of living. The Series EE Savings Bond earns market-based rates, keyed to five-year Treasury securities. Both series offer rates that are comparable to the rates of similar savings tools.
Tax advantages. Savings bond earnings are exempt from all state and local income taxes. You can defer federal income taxes on earnings until the savings bonds either reach final maturity or until you redeem them. If you use savings bonds to pay for qualified higher education expenses, your earnings may be exempt from federal income taxes, too.
Safety. Savings bonds are backed by the full faith and credit of the United States. Your principal and earned interest are safe and cannot be lost because of changes in the market. Savings bonds are registered with the Treasury Department, so if yours are lost, stolen or destroyed, you may have them replaced at no cost to you.
Affordability. You can buy savings bonds for as little as $25. Participants in the Payroll Savings Plan may buy them in even smaller installments. The Treasury Department never charges fees or service charges when you buy or redeem savings bonds. Because savings bonds come in eight denominations - $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000--you can tailor your purchases to meet your goals and needs.
Accessibility. After an initial holding period of six months from the issue date, the money you place in savings bonds is available whenever you want it. However, if you redeem a savings bond earlier than five years from the issue date, you pay an early redemption penalty equal to the last three months of earned interest.
Convenience. You can buy savings bonds in several ways. The easiest is through the Payroll Savings Plan with an automatic allotment. If you do not have access to payroll savings, the EasySaver Plan offers similar convenience by allowing automatic purchases with allotments from your checking or savings account. You can also buy savings bonds at 40,000 financial institutions nationwide and online with a credit card at Savings Bonds Direct.
Visit www.savingsbonds.gov* for more information.
