Savings Bonds  

Savings Bonds are non-marketable securities issued by the U.S. Treasury Department, and are purchased or sold by agents authorized by the Treasury Department. Savings bond interest is exempt from all state and local income taxes. You receive the interest when you redeem the bond.

I Bonds are bought for full face value; Series EE Savings Bonds are purchased at half of face value for an investment as little as $25. You may buy up to $5,000 of paper I Bonds and $5,000 of electronically held bonds in your own name each calendar year. You may buy up to $5,000 ($10,000 face value) of paper Series EE Savings Bonds and $5,000 of electronically held bonds in your own name each calendar year.

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Yield

I Bonds

Tax Advantages



Liquidity and Penalities

Older Bonds

 Savings Bonds Rates
Prior to January 2009 you could buy $30,000 of each type a year but the Treasury cut it to $5,000 to "refocus the savings bond program" on small savers - even though 98% of savings bond purchasers bought under $5,000 a year anyway. It still means an individual can buy up to $10,000 of I Bonds if they buy both paper and non-paper, and a couple using two social security numbers could buy $20,000 a year. 


Yield
 Series EE Savings Bonds issued on and after May 1, 2005 earn a fixed rate of interest, set at the time of purchase. The new rate applies for the 30-year life of each bond, including a 10-year extended maturity period, unless a different rate or rate structure is announced for the extension period. Interest accrues monthly and is compounded semiannually. EE bonds with issue dates prior to May 1, 2005 continue to earn interest according to the terms in effect when they were issued. The Treasury Department announces new rates each May and November and the interest rate earned by the bonds is updated every six months as a result. Series EE Savings Bonds offer a minimum guaranteed return ensuring principal will at least double after 20 years, this works out to an effective annual rate of 3.53%.


Beginning December 11, 2001 Series EE savings bonds were inscribed with the special legend "Patriot Bond." Proceeds from the bonds are not earmarked to fight the war on terrorism but are deposited in the general Treasury fund and spent like other revenues.

I Bonds

I Bonds combine a minimum rate with an index-linked component. The fixed minimum rate remains the same for the life of the bond while the index-linked side is adjusted every six months to track the inflation rate as computed using the Consumer Price Index. The total or “composite” rate on the I Bond is updated every six months to reflect the fixed rate in effect at purchase and the inflation adjustment announced in May and November.

 

I Bonds purchased after November 2009 earn a 0.30% fixed rate of return above inflation. The 0.30% fixed rate applies for the 30-year life of I Bonds purchased during the preceding six-month period.



Tax Advantages
 Interest compounding within an I Bond or Series EE Savings Bond grows tax-deferred until it is redeemed, or until final maturity is reached in 30 years, whichever comes first (You may also elect to report savings bonds interest to the IRS and pay the applicable federal income taxes annually).

Tax-deferred does not mean tax-free, interest is taxed when withdrawn (and you rued interest at final maturity even if you do not cash in the bond). If I Bomust pay taxes on the accnd or Series EE Savings Bond interest is used to pay for college tuition and fees, and your household income meets the IRS guideline, the bond interest may be excluded from federal income taxation (the education tax exclusion is described in 26 U.S.C. 135).

In the past you could exchange your Series EE Savings Bonds for Series HH Savings Bonds and this allowed you to continue deferring federal income taxes on the EE Bonds’ interest earnings for up to an additional 20 years. However, this option went away after August 2004 when the HH bonds were discontinued.

Safety of Principal
You have to ask?

Liquidity and Penalties
 The money placed in savings bonds cannot be withdrawn for 1 year. If redeemed within 5 years after purchase the penalty for early withdrawal is equal to the last three months of earned interest.

Savings Bonds have a 5-year penalty period and cannot be withdrawn for one year after purchase

Older Bonds
If you own Series A, B, C or D Savings Bonds they quit earning interest when Harry Truman was president and might be worth more as a collectible than through redemption at face value (The Treasury also issued Series F and G, J and K bonds, and Savings Notes. None of which still earn interest).

Series E bonds were issued through 30 June 1980. Series E bonds originally issued through November 1965 stopped earning interest November 2005 – 40 years later. All later E and EE bonds have a 30 year maturity.

Series EE Bonds issued before May 1995 have higher minimum guaranteed rates than those issued now. The guaranteed minimum rates range from 4% for bonds issued March 1993 - April 1995, to 7.5% for bonds issued or extended from November 1982 - October 1986. This initial minimum rate applies for a bond's original maturity period.

Savings Bond Rates

Series EE Bonds issued May 1997 to April 2005 earn the "period yield" at the savings bond rates determined each May 1 and November 1. New Series EE bonds earn the "new bonds" rate for the next 19 years, 364 days (see minimum guarantee at the bottom  of the page).
Rates apply to the first semiannual earning period beginning on or after the effective date shown

I Bonds

Series EE Bonds

Issue Date

New Issue Yield

Period Starting

Period Yield

New Bonds

NOV 2011

3.06%

NOV 2011

1.19%

0.60%

MAY 2011

4.60%

MAY 2011

1.77%

1.10%

NOV 2010

0.74%

NOV 2010

1.50%

0.60%

MAY 2010

1.74%

MAY 2010

2.16%

1.40%

NOV 2009

3.36%

NOV 2009

2.19%

1.20%

MAY 2009

0%

MAY 2009

1.64%

0.70%

NOV 2008

5.64%

NOV 2008

2.80%

1.30%

MAY 2008

4.84%

MAY 2008

2.74%

1.40%

NOV 2007

4.28%

NOV 2007

4.11%

3.00%

MAY 2007

3.74%

MAY 2007

4.15%

3.40%

NOV 2006

4.52%

NOV 2006

4.39%

3.60%

MAY 2006

2.41%

MAY 2006

4.11%

3.70%

NOV 2005

6.73%

NOV 2005

3.61%

3.20%

MAY 2005

4.80%

MAY 2005

3.42%

3.50%

NOV 2004

3.68%

NOV 2004

3.25%

MAY 2004

3.53%

MAY 2004

2.84%

NOV 2003

3.12%

NOV 2003

2.61%

MAY 2003

3.53%

MAY 2003

2.66%

NOV 2002

4.04%

NOV 2002

3.25%

MAY 2002

4.13%

MAY 2002

3.96%

NOV 2001

4.17%

NOV 2001

4.07%

MAY 2001

5.28%

MAY 2001

4.50%

NOV 2000

5.77%

NOV 2000

5.54%

MAY 2000

6.12%

MAY 2000

5.73%

NOV 1999

6.01%

NOV 1999

5.19%

MAY 1999

5.84%

MAY 1999

4.31%

NOV 1998

5.79%

NOV 1998

4.60%

MAY 1998

5.06%

NOV 1997

5.59%


Link to the Savings Bond Calculator
http://www.treasurydirect.gov/BC/SBCPrice


I Bonds Vs. Serries EE

Differences Between

I Bonds

Series EE

Purchased at

Face Value

1/2 of Face Value

Yield

combine a minimum rate with an inflation-linked component

Rate Locked In

Minimum Guarantee

Effective minimum yield of zero

Minimum Guarantee of 3.53% effective yield
if held 20 years


Savings Bonds Are Available At
Available for purchase at most banks and online at http://www.treasurydirect.gov/