Series Savings Bond Types: Advantages and Disadvantages

Savings bonds have been a staple in American living for decades. These may be one of the safest investments a person can make. While nothing is guaranteed, savings bonds are backed by the U.S government.

EE Bond vs I Bond

The two most popular versions are the EE savings bonds and I savings bonds. While bonds purchased between May 1997 and April 30, 2005 are variable, current savings bonds pay a fixed rate. The interest is added to the bond on a monthly basis and paid out to the holder when they cash in the bond.

Early Withdrawal Fine

The minimum term of ownership is one year and maturity is 30 years. There is a savings bond penalty for any redemption less than five years old. The owner will lose the 3 most recent months interest.  These bonds can either be purchased in paper or electronic form. The paper version can be purchased at most financial institutions, and the electronic version can be handled right through the Treasury web site. The minimum investment is $25 with a maximum of $10,000.

EE Savings bonds and their counterparts are purchased for three main reasons:

• Education
• Retirement
• Gift

Bond Interest Taxation

The interest earned on these bonds is subject to federal income tax in the year of redemption, but there are some educational exclusions. There is a savings bond calculator on the Treasury’s web site where you can find out the value of your bonds. If you hold savings bonds and are concerned about the savings bond penalty, the savings bond calculator can help you.

Savings Bonds Financial Help

Not all investments are for all people. It is imperative that all financial decisions be discussed with an experienced savings bonds financial professional. Whether its about the college I saving bond benefit or any other investment question, please consult with a professional.