US Savings Bond safe place to save your money?
US Savings Bond might be the answer for the investor who is tired of the low interest rate on his or her savings account. These bonds are an equally safe place to keep some of the investor’s savings, while still accruing interest. While banks are insured by the Federal Deposit Insurance Corporation or FDIC for deposits of up $100,000 of savings, the interest rate is usually very low.
With bonds, however, an investor has the assurance of the United States government. Saving bonds are backed not by insurance, but by the credit of the United States, meaning that as long as the country has the money, the obligation to pay the investor the principle and the interest remains.
What are the benefits of Savings Bonds? The best advantage of savings bonds is, as they are issued by the federal government, they are not only exempt from state or local taxes, but any interest earned on the bonds can be tax-deferred until the bonds are redeemed. In other words, no tax is due until, the bond is cashed. Regular interest on a savings account is taxable as income each year, so bonds are good alternative.
US Savings Bond the Series EE Bonds – One US Savings Bond is known as the EE bond which replaced the earlier E bonds that are no longer issued. The Series EE started to be issued by the United States Treasury on May 1, 2005. Series EE earns a fixed rate of interest, which enables the investor calculate what a bond is worth at any given time. Series EE bonds purchased between 1997 and, 2005 earned interest based on a variable market 5 year yield.
US Savings Bond—Electronic EE bonds – Getting United States Savings Bonds can be even easier if purchased directly from the Treasury directly online. These bonds are sold at “face value” which means if the investor pays $50 for the bond then the value of the bond they receive is $50. It remains at full value until it is redeemed. The maximum amount in savings bonds which a single investor can purchase per year is $5000.
US Savings Bond—Paper EE Bonds
The main difference between the paper version and electronic version of bonds is the value. If an investor pays $50 for a bond the value of the bond is actually $100. This bond also increases in value over time, as interest is earned and the bond will not reach the face value until it has matured. The other difference is that investors can only purchase paper bonds in “pre-determined” denominations including: $50, $75, $100, $200, $500, $1000, $5000, and $10,000. As with the electronic bonds the maximum purchase amount during a single calendar year is also $5000.
Series I Bonds US Savings Bond – I bonds like EE bonds, have an interest rate that is indexed to the inflation rate.
The type of US Savings Bond an investor should purchase depends on what return they need from the investment.