Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.
Starting January 1, 2012, you can no longer buy paper savings bonds at financial institutions. But you can go online to purchase two types of electronic savings bonds. Under the rules, an individual can buy a maximum of $10,000 worth in each series in a single calendar year, or a total of $20,000.
Series EE U.S. Savings Bonds are an appreciation-type (or accrual-type) savings security. They are sold at face value, so you’ll pay $50 for a $50 bond. The bond is worth its full value upon redemption. The interest is issued electronically to your designated account. You cannot buy more than $10,000 (face value) of Series EE bonds in any calendar year. If you redeem the bonds in the first five years of buying them, you’ll forfeit interest payments for the three most recent months. After five years, you won’t be penalized for redemptions.
Series I U.S. Savings Bonds are inflation-indexed. They are sold at face value and you can buy up to $10,000 (face value) of Series I bonds in any calendar year. Series I Bonds offer a fixed rate of interest, adjusted for inflation. As with Series EE Bonds, if you redeem Series I Bonds in the first five years, you’ll forfeit the three most recent months’ interest. After five years, you won’t be penalized for redemptions.
Key advantages of savings bonds include:
You can buy these electronic savings bonds in penny increments, from $25 up to $5,000 each year. (In paper form, these bonds were only available in specific denominations.) For more on the switch to all-electronic savings bonds and on how to open a TreasuryDirect account, please visit this page at TreasuryDirect.gov. You can use the Savings Bond Calculator and compare the different types of securities issued by the Treasury.