US Savings Bonds

Posts Tagged ‘ee series bonds’

A complete overview of EE Series Bonds, Part V

(c) Copyright 2006 by Harold Pennington

The interest-earning life of EE Series Savings Bonds

At a minimum, the U.S. Treasury guarantees that a Series EE Bond’s value will double after 20 years. This is called the ‘original maturity.’ After that, it will continue to earn the fixed rate for another 10 years unless a new rate or rate structure is announced.

If for some reason bond’s value does not double as the result of applying the fixed rate for 20 years, the U.S. Treasury will make a one-time adjustment at original maturity to make up the difference.

After 30 years, they won’t earn interest anymore, so it will be time to take that money out and invest it elsewhere… Or have one heck of a party!

In conclusion, the EE Series savings bond has a lot to offer both new and experienced investors. With their all-around competitive rates, perfect accessibility, advanced liquidity, complete safety, and nearly no taxation at all, it’s no wonder why they are causing such a commotion in the investor marketplace.

Don’t just sit there and think about checking into them one day. I challenge you to learn more about these fascinating investments to see if they are right for your portfolio. You can pick up a newspaper at any time and see if the latest bond rates appeal to you, however you have to keep in mind all of the extras you get with the EE Series Bond. After taking into consideration the tax benefits, investment guarantee, and liquidity, you’ll soon see that there’s no better cookie jar to leave your money in.

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Harold Pennington is an independent Financial Advisor who is an avid enthusiast of tax-advantaged investments. Don’t miss this completely free resource website on US Savings Bonds.

A complete overview of EE Series Bonds, Part IV

(c) Copyright 2006 by Harold Pennington 

Interest Penalty on Series EE Savings Bonds

An interest penalty of three-month’s worth of interest will be applied to bonds held less than five years from issue date. This rewards longer-term bond holders who benefit from higher 5-year rates over the full life of the bond. 

For example, if you buy an EE Series Bond and redeem it 24 months later, you’ll get back your original investment and 21 months’ worth of interest. The value of the bond would be based on the announced rates applied over the initial 21-month period. 

Tax Advantages of Series EE Savings Bonds

My favorite consideration about any given investment is always how well it gets around taxation. Considering this is issued by the government, it should have a good advantage here too, and it does. First off, all interest earned on your Series EE Bonds is exempt from state and local income taxes. Also, you can defer federal income tax until you redeem the bond, or it stops earning interest after 30 years. 

Finally, special tax benefits are available for many different types of educational savings. If you qualify, you can exclude all or part of the interest earned on EE Bonds from income when the bonds are redeemed to pay for post-secondary tuition and fees. 

So basically, the only tax you’ll ever have to pay on these great little investments is when you redeem them, only on the federal level, and then only if you can’t find some way to credit some form of educational experience by you, your spouse, or one of your dependants. 

Compared to higher-yield investments like Mutual Funds, the taxation benefits on Series EE Bonds alone make this a much more attractive option.

A complete overview of EE Series Bonds, Part III

(c) Copyright 2006 by Harold Pennington 

The Liquidity of Series EE Savings Bonds

Series EE Savings Bonds must be held a minimum of one year, which is far better than many other government-backed bonds. You can redeem them anytime after that period. 

Who is eligible to buy EE Series Bonds?

EE Series Savings Bonds are like any other government-backed bond in that they can be owned by the same investors. This is strictly: 

• Individuals (at any age!)
• Corporations
• Associations
• Organizations (public or private)
• Fiduciaries

However, at this time, only Individuals can open a Treasurydirect account and purchase Savings Bonds online. 

It might also be important to note that individuals who can own any kind of US Savings Bond must have a Social Security Number, and be either a Resident of the US or outlying territory, a Citizen of the US living abroad, or a Civilian employee of the US, regardless of residence. 

EE Series Bond Rates and Terms

Series EE Savings Bonds issued during May 2005 and afterwards earn a fixed rate of interest decided by the FED, and can be checked in any newspaper finance section daily. Before May 2005, their interest wasn’t fixed, but tied to a variable rate that wasn’t very popular with investors, so that’s the main reason you’ve only heard of them lately. 

Interest rates for all new bond issues are adjusted each May 1st and November 1st. So if you’re shopping bonds in late April or October, pay really close attention to the trend in interest rates before purchasing! 

Also, Series EE Bonds compound in interest semiannually. This means that your interest can work on top of previous interest, giving you a better return each year.