Welcome to Savings-Bond.org
Introduction: What To Know And Steps For Buying
This website focuses on the Series EE and Series I savings bonds offered by the Treasury division of the U.S. government. For most of the past two decades advice for saving and investing has gravitated to stocks and mutual funds with very little to say about government programs like T Notes, Bills, and the smaller Series EE and I. As a result, these Treasury securities are not well understood, which we think has led to some detriment in the way people invest. While we don't think one should exclusively invest in U.S. government bonds for a number of reasons, we do find a number of virtues that make them a compelling part of a well-rounded portfolio. In short, the moral of our site is that the Series EE and I could very well be a part of an individual's investment strategy.
This website focuses on the Series EE and Series I savings bonds offered by the Treasury division of the U.S. government. For most of the past two decades advice for saving and investing has gravitated to stocks and mutual funds with very little to say about government programs like T Notes, Bills, and the smaller Series EE and I. As a result, these Treasury securities are not well understood, which we think has led to some detriment in the way people invest. While we don't think one should exclusively invest in U.S. government bonds for a number of reasons, we do find a number of virtues that make them a compelling part of a well-rounded portfolio. In short, the moral of our site is that the Series EE and I could very well be a part of an individual's investment strategy.
Savings Bond Are On Par With Mutual Fund Indices From 2005 to 2010
Diversifying assets in the stock market should result in low volatility but when comparing a popular index such as the SP500 to either Series I or Series EE reveals that the savings bond exhibits much more stable growth than stock indices. Below is a chart showing the result of investing $100 each month starting in the middle of 2005 and ending in 2010 for a span of 5 years. One sees that the Series I/EE (black and red) grows steadily, but at points even outpacing the SP500 (green). The SP500 in contrast is highly erratic, losing lots of value in the aftermath of the 2007 real estate crisis although gaining it back in the last two years. For comparison, an account that merely tracks the steady input of $100 per month is shown (blue).
Diversifying assets in the stock market should result in low volatility but when comparing a popular index such as the SP500 to either Series I or Series EE reveals that the savings bond exhibits much more stable growth than stock indices. Below is a chart showing the result of investing $100 each month starting in the middle of 2005 and ending in 2010 for a span of 5 years. One sees that the Series I/EE (black and red) grows steadily, but at points even outpacing the SP500 (green). The SP500 in contrast is highly erratic, losing lots of value in the aftermath of the 2007 real estate crisis although gaining it back in the last two years. For comparison, an account that merely tracks the steady input of $100 per month is shown (blue).
Bonds Have Other Advantages
Aside from the ROI performance when compared to the general stock market, there are some real benefits to owning these types of government-backed securities.
Your Choices: Series EE And Series I
By way of introduction, we explain in brief the two types: the Series EE and the Series I. The names are not so important, referring largely to a sequential ordering scheme, but reflecting subtly the nature of the bond. The Series EE is simply one of the latest in a long line of Treasury offerings which began with the Series A, B etc. The Series EE is distinguished by a 30 year maturity period and a fixed rate of return honored by the U.S. government. The Series I, in contrast, has variable returns but is indexed to inflation with a little bit of bonus in good times.
How To Buy: The TreasuryDirect Site
Most people nowadays buy their bonds through the Treasury's own website. The site has a wealth of information about its Notes, Bills, Bonds, rates and instructions for purchase (in fact, maybe a bit too much and not always focused or pertinent which is why we've created this website). Find out more at the Treasury's website for ordinary investors. Older paper bonds continue to earn money but even some of these are convertible to electronic account form such that the physical paper is no longer needed. A conversion is done through the site. To buy through the website, a user simply creates an account linked to a U.S. bank account which allows for the transfer of funds into and out of the bonds.
Look Up Historical Rates Of Return
Before making a purchase, you will need the latest rate information, so check out the rates for the Series EE and rates for the Series I. However, read our site for more information about how the rates are calculated, how they affect earnings (very subtle and not straightforward), and what sort of penalties are imposed for early selling. Rates alone do not provide all information about how your investment will do.
Understand The Redemption Conditions And Penalties
Savings bonds may be redeemed before their maturity date, but a number of considerations will affect how you treat your Series EE and I. First, within the first twelve months they are not redeemable at all. They must be held for at least 12 months before redemption. Second, even past 12 months redemption will incur a 3 month penalty. That is, the accrued interest from the last three months are deducted from the earnings. This penalty will kick in as long as the bond is redeemed before 5 years have passed since the purchase date. Third, the bond is only free of these penalties and restrictions after 5 years. Fourth, the bond experiences a one time "doubling" adjustment at 20 years if the value hasn't doubled yet.
Calculate Earnings
To help you understand the earnings growth, we have created a calculator that requires only input of the date of purchase, the initial value and whether it is a Series EE or I. There are other calculators online, which we urge you try out including one at the Treasury website. The calculator is pretty much necessary given that returns are indicated by a rate, and this rate is constantly fluctuating every six months.
Learning More
By no means will you be able to learn everything about the Series EE and I on our little website alone. Instead we highly recommend that you check out these resources:
Aside from the ROI performance when compared to the general stock market, there are some real benefits to owning these types of government-backed securities.
- When specifying the owners of the bond, it is possible to put both your own name and that of a minor. This unique feature means that people like to give Series EE or I as gifts to children for special events like birthdays, graduation, for the purpose of college education, retirement, or generalized savings.
- Federal bonds are not taxed by the state or city. Futhermore, when they are used to finance education, there are additional tax benefits: almost all of the interest accrued over the years is deductible from tax! There are some restrictions, for example for financing one's own education the bond should be registered in your own name. Also, the recipient of the tax benefit cannot have an income above a threshold (which changes from year to year).
Your Choices: Series EE And Series I
By way of introduction, we explain in brief the two types: the Series EE and the Series I. The names are not so important, referring largely to a sequential ordering scheme, but reflecting subtly the nature of the bond. The Series EE is simply one of the latest in a long line of Treasury offerings which began with the Series A, B etc. The Series EE is distinguished by a 30 year maturity period and a fixed rate of return honored by the U.S. government. The Series I, in contrast, has variable returns but is indexed to inflation with a little bit of bonus in good times.
How To Buy: The TreasuryDirect Site
Most people nowadays buy their bonds through the Treasury's own website. The site has a wealth of information about its Notes, Bills, Bonds, rates and instructions for purchase (in fact, maybe a bit too much and not always focused or pertinent which is why we've created this website). Find out more at the Treasury's website for ordinary investors. Older paper bonds continue to earn money but even some of these are convertible to electronic account form such that the physical paper is no longer needed. A conversion is done through the site. To buy through the website, a user simply creates an account linked to a U.S. bank account which allows for the transfer of funds into and out of the bonds.
Look Up Historical Rates Of Return
Before making a purchase, you will need the latest rate information, so check out the rates for the Series EE and rates for the Series I. However, read our site for more information about how the rates are calculated, how they affect earnings (very subtle and not straightforward), and what sort of penalties are imposed for early selling. Rates alone do not provide all information about how your investment will do.
Understand The Redemption Conditions And Penalties
Savings bonds may be redeemed before their maturity date, but a number of considerations will affect how you treat your Series EE and I. First, within the first twelve months they are not redeemable at all. They must be held for at least 12 months before redemption. Second, even past 12 months redemption will incur a 3 month penalty. That is, the accrued interest from the last three months are deducted from the earnings. This penalty will kick in as long as the bond is redeemed before 5 years have passed since the purchase date. Third, the bond is only free of these penalties and restrictions after 5 years. Fourth, the bond experiences a one time "doubling" adjustment at 20 years if the value hasn't doubled yet.
Calculate Earnings
To help you understand the earnings growth, we have created a calculator that requires only input of the date of purchase, the initial value and whether it is a Series EE or I. There are other calculators online, which we urge you try out including one at the Treasury website. The calculator is pretty much necessary given that returns are indicated by a rate, and this rate is constantly fluctuating every six months.
Learning More
By no means will you be able to learn everything about the Series EE and I on our little website alone. Instead we highly recommend that you check out these resources:
