I’ve written a number of articles over the years on conservative investment strategies and often mentioned just how attractive I Savings Bonds are. A great overall investment; anyone purchasing I bonds between last November though next April will earn an astonishing 7.12% on their investment the first 6 months they own them. The rate changes every 6 months thereafter. I’ve purchased I Bonds since their inception in 1999 and started purchasing EE Bonds monthly through payroll deduction back in 1973.
The last article I wrote on this subject, “Earn 3.54% with Series I Savings Bonds – Tax Deferred Income” earlier this year shows how to buy them, how they accrue interest, and their many advantages. When I wrote the article in May they were paying 3.54%, still a great rate considering my current savings account bank statement shows interest earned of just .05%! An I bond that I purchased in November of 1999, a $200 bond, is now worth $687 today and yielding 10.6%! The early I Bonds had a 3% fixed rate plus the inflation rate.
The government is ripping off those on fixed incomes, or for that matter anyone with a savings account. They are artificially keeping interest rates low to service the huge national debt this country has accrued over the years, though all administrations.
Explore this lucrative investment opportunity. You don’t hear much about savings bonds these days because the Treasury unfortunately stopped issuing paper bonds years ago. You have to purchase them online through Treasury Direct or you can elect to have a paper bond issued instead of receiving cash for your federal income tax refund. Individual can purchase up to $10,000 a year online and an additional $5,000 paper bond with your federal income tax refund. It’s easy to sign up and invest in Savings Bonds or for that matter any of the Treasury’s Notes, Bills and Bonds.
EE Bonds are currently yielding just .10%. Regardless of the current E Bond rate, at 20 years the E Bond will be worth twice what you paid for it. The Treasury makes a one-time adjustment to the E Bond’s face value. This provides approximately a 3% yield if held for 20 years. A $500 EE Bond that I purchased for $250 in November of 2000, just over 20 years ago, is now worth $535. Still a good deal for those looking for long term gains. After 30 years they stop earning interest and you should cash them in. The earnings are tax deferred; when cashed in you will have to pay taxes on the interest.
This is an ideal time to start investing in I Savings Bonds. You can use your RMD distribution to purchase up to $10,000 this year before the end of the month and then next month purchase an additional $10,000. Invest whatever you can afford; it is also a good way to move cash from low interest savings accounts and CDs to an inflation indexed investment that is guaranteed by the full faith of the U.S. Government.
You can track the current interest rate, earnings and total value of all of your Savings Bonds with their Savings Bond Calculator. Savings bonds can’t be cashed in during the first year of ownership, they can be redeemed after 12 months. if you redeem an I bond within the first 5 years, you’ll lose your last 3 months interest. For example, if you redeem an I bond after 18 months, you’ll receive the first 15 months of interest. Review the previous article I wrote on this subject for additional details.
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Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Dennis V. Damp is an author, retired federal manager, business owner, career counselor and veteran. Damp is the author of 28 books, a recognized benefits expert, and a retired federal manager with 35 years’ service. Dennis has been a guest on hundreds of radio talk shows, CNN’s YOUR MONEY and the Lou Dobbs Cable TV shows, lectured at universities and colleges, produced Internet web sites and training videos, and has written hundreds of articles for national magazines and newspapers. His books have been featured in the Wall Street Journal, Washington Post, New York Times and U.S. News & World Report.
Dennis joined the Air Force in 1968 and spent over three years on active duty and an additional seven years with the Air National Guard. He was hired by the Department of Defense (DOD) after leaving active duty and transferred to the Federal Aviation Administration (FAA) in 1975. He spent the remainder of his career in various positions with the FAA. His last position was technical operations manager at the Pittsburgh International Airport’s air traffic control tower.
