US Savings Bonds

Posts Tagged ‘investing’

Question: Ginnie Mae funds risk?

I understand Ginnie Mae funds are not Mutual Funds. It does not invest in stocks. It primarily invests in Mortgage Pass Throughs backed by the Government of United States.

What does being backed by Gov of US mean? I don’t think it means it’s FDIC insured. If it does not invest in coporate stock/bonds or government bonds, how risky is it to invest in Ginnie Mae funds?

It certains offers returns better than online savings bank, but I don’t think Ginnie Mae funds can be considered as savings. They are still investments? Correct?

Please guide me about Ginnie Mae funds. Its risk, benefits, how different is it from conventional Mutual Funds. Thanks

Answer: Ginnie Mae are bonds or bond funds which are debt instruments packaged by Ginnie Mae and backed by Uncle Sam. The bonds invest in mostly house mortgages such as 30 year fixed or variable mortgages. If the home owner defaults then Uncle Sam will pay you back. The risk has went up with Ginnie Mae since the number of home mortgages that have defaulted have increased with many people just walking away since their homes are worth less in value or underwater then when they first bought them.

At one time this was considered a sound investment – real estate always seemed to go up and home ownership was considered a safe investment. Today, with the number of defaults on the rise I wouldn’t want to invest more than 30% of my bond portfolio into mortgage back bonds. Uncle Sam’s backing may also be in jeopardy as loan losses rise and tax payers the ultimate payer of the losses.

Put this in the category of a bond mutual fund.

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Question: How will interest on US Savings Bonds that I cashed in 2008 effect my tax refund?

I needed the money, so I cashed in all the US Savings Bonds that I had on-hand. I recently got a 1099-INT from my bank that says the interest on US Savings Bonds and Treasury obligations is $632 (or thereabouts). I’m aware that I owe taxes on this interest… how much money are we talking about? How badly will this change the amount of money that I get in my tax return? I ask because I truly need that money. I’m counting on my tax return to help me pay bills.

Thanks!

Answer: Assuming you didn’t have anything withheld for income tax when you cashed in the bonds, they’ll affect your refund since you’ll pay the tax from that. If you are in a 15% bracket, your refund would decrease by just under $100. In a 10% bracket, it would decrease by $63.

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Question: What investment would be best? We have $4K for our emergency fund–$ needs to be liquid but earn interest?

We have $4,000 we want to keep reasonably liquid as an emergency fund but we’d like to earn the best interest on it that we can without risking losing the principal. The stock market is out–too risky for us. Savings Bonds are not liquid enough for us plus interest is not that good. Interest on T-bills is not that good either. Seems like CDs or money market are the only real options…with CDs perhaps being the better of the two options for us. Does anyone have any other suggestions?

Answer: Put the money into an internet bank. They pay as much interest as a CD would, but you can get the money anytime you need it. There are no fees, which you would have to pay if you put the money into a money market fund. It is also very easy to transfer money in and out of the account. For more on this including links to internet banks, click on http://www.vilkri.com/pubreader.php?page=internet_bank

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