Savings Bonds
Another possible option for your savings is in savings bonds. Savings bonds are issued by the U.S. government and are backed by its full faith and credit. A savings bond offers a fixed rate of interest over a fixed period of time. These bonds have a maturity at some date in the future in which the bond will reach its maximum value, typically 20 to 30 years from the date of purchase. Many people find these bonds attractive because they are not subject to state or local income taxes. U.S. savings bonds, like CDs, are one of the safest types of investments because they are endorsed by the federal government and, therefore, are virtually risk free. These bonds do not earn much interest compared to some other options, but they do offer a great deal of security.
Savings bonds are credited with interest each month and you can “cash in” at any time, although if done prior to maturity a loss of some interest will result. These bonds are not easily transferred and are non-negotiable. Savings bonds can be purchased at some banks or online from the government at Treasury Direct.
Similar to CDs, you could encounter liquidity issues with savings bonds since they are purchased separately and you can only receive money from them through redemption at either a bank or by mail.
History
Savings Bonds have been referred to as an “All American Investment.” They are an easy way to save money safely and receive a small interest rate. Interest rates change semi-annually, in May and November, based on current market rates and inflation. Current rates can be found at the Treasury Direct website.
There are two main types of bonds offered, Series I and Series EE. The Inflation Indexed (Series I Bond) is designed to offer a way to save that protects an individual’s purchasing power by assuring a real rate of return over and above inflation. I Bonds have features that make them attractive to many investors. They are sold at face value in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000 and earn interest for as long as 30 years. I Bond earnings are added every month and interest is compounded semi-annually. These bonds are exempt from state and local income tax and federal income taxes can be deferred (postponed) until the bonds are cashed or stop earning interest after 30 years. Investors who cash I Bonds before five years are subject to a 3-month interest penalty.
The Series EE Savings Bond pays interest equal to 90% of the average 5-year Treasury securities yield for the preceding six months. This simply means that rates on these bonds are based on rates set by participants in the large government bond trading market. The Series I Bond, on the other hand, carries a fixed base rate plus a semi-annual calculation based on the rate of inflation as measured by the Consumer Price Index.
The Series EE bond replaced the Series E bond, which is most often associated with World War II war bonds. The first Series E Bond was purchased by President Franklin D. Roosevelt from Secretary of the Treasury Henry Morgenthau on May 1, 1941.
During World War II, numerous Hollywood's celebrities took part in bond drives to aid the war effort. Poster art used to advertise war bonds is frequently seen in special exhibits in museums to this day. The war bond campaign has been called a unique and necessary fusion of nationalism and consumerism which offered Americans a moral as well as financial stake in the war.
Prior to WWII, Liberty Bonds helped finance World War I and President Woodrow Wilson purchased as well as participated in Liberty Bond Drives as well.
Following tradition, The Department of the Treasury unveiled the new Series EE Patriot Bond on December 11, 2001, the three-month anniversary of the September 11th terrorist attacks. Funds raised by these bonds contribute to the federal government's effort to fight the war on global terrorism. Series EE savings bonds sold through financial institutions will be especially inscribed with the legend "Patriot Bond."
Series EE Savings Bonds (now known as Patriot Bonds)
- Sold in denominations of: $50, $75, $100, $200, $500, $1000, $5000, & $10000
- A $20,000 bond limitation began in January 2008 ($2,500 in paper Series EE Bonds, $2,500 in electronic Series EE Bonds, $5,000 in paper Series I Bonds, & $5,000 in electronic Series I Bonds). Purchasers are restricted to a maximum Series EE purchase of $5,000 per year (matures at $10,000), half issued on paper and half purchased electronically.
- Issued since January 1980, Patriot Bonds support the war effort since December 11, 2001.
- Purchase at 50% (1/2, half) of face value.
- A $100 bond purchased in the past would have only cost $50, but matures at $100.
- Series EE Bonds reach final maturity (stop earning interest altogether) 30 years from the issue date.
- 3-month penalty for cashing in a Series EE Bond prior to holding for five years.
- Interest earned monthly and is compounded semi-annually.
- Series EE Bonds are not transferable.
Special Note: Proceeds from the sale of Patriot Bonds go into the Treasuries General Fund and are not specifically earmarked for the war. Monies for the war and other federal government spending also draw from this general fund, which may contribute to fighting the war on terrorism. Currently, economists are urging people to spend to help spark the economy rather than save with war bonds.
The Series EE Patriot Bond is identical to other Series EE bonds except that the words "Patriot Bond" are printed on the top half of the bond between the social security number and issue date. Take a look at the bond below.
Series I Savings Bonds
- Sold in denominations of: $50, $75, $100, $200, $500, $1000, $5000
- A $20,000 bond limitation began in January 2008 ($5,000 in paper Series I Bonds, $5,000 in electronic Series I Bonds, $2,500 in paper Series EE Bonds, & $2,500 in electronic Series EE Bonds). Purchasers are restricted to a maximum Series I purchase of $10,000 per year, half issued on paper and half purchased electronically.
- Issued since September 1998.
- Purchase at 100% (full) face value.
- A $100 bond purchased in the past would have cost $100, but matures with interest.
- Series EE Bonds reach final maturity (stop earning interest altogether) 30 years from the issue date.
- 3-month penalty for cashing in a Series EE Bond prior to holding for five years.
- Interest earned monthly and is compounded semi-annually.
- Government establishes interest rate semi-annually in May & November.
Series I Bonds are currently being offered in eight (8) distinct fashions. Each of the eight bonds honors prominent Americans who have contributed to the history of our great nation and represents the diversity of American people and culture. Below is a representation of a $100 Series I Savings Bond as well as likenesses of the other bonds available: (this information taken from Treasury Direct)
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Helen Keller (1880-1968) lost her sight and hearing as a young child due to illness, but overcame these challenges and went on to become the twentieth century's best known advocate for people with disabilities. Through her writing, lectures, and work with various organizations, Keller focused public attention on issues affecting the handicapped. She was also successful in making Braille the standard for printed communication with the blind. She had a lifelong relationship with the American Foundation for the Blind, and was instrumental in the Lions Club International's devotion to the blind and blindness prevention. |
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Dr. Hector P. Garcia (1914-1996) was a medical doctor who spent his life working to help the poor, sick, and neglected. Dr. Garcia served in World War II, received the Bronze Star Medal, and became a leading advocate for Mexican-American veterans' rights. He was an activist in the Latino civil rights movement and founder of the American G.I. Forum, an organization that addresses the health, education, and civil rights of Hispanic veterans. Dr. Garcia was the first Mexican-American to serve on the U.S. Commission on Civil Rights and served as U.S. Ambassador to the United Nations. He received our nation's highest civil honor, the Presidential Medal of Freedom, in 1984 from President Ronald Reagan. |
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Dr. Martin Luther King, Jr. (1929-1968), a Baptist minister from Atlanta, was one of the most prominent figures in the Civil Rights movement, which succeeded in achieving legal equality for African Americans. He co-founded and served as the first president of the Southern Christian Leadership Conference, organized to promote the advancement of integration and legal and social equality. Dr. King was the recipient of numerous awards, which recognized his outstanding work for non violent social change, including the Nobel Peace Prize in 1964. In 1986, Dr. King's birthday became a national holiday in recognition of his enormous contributions to American history. |
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Chief Joseph (1840-1904), a Native American leader, is best known for his principled resistance to the U.S. government's attempts to force the Nez Perce onto a reservation. An 1863 treaty took away their lands and forced the Nez Perce and their leader into a position of resistance. Though he consistently opposed war, when conflict became inevitable Chief Joseph and other leaders led the Nez Perce on a courageous retreat in 1877 for more than a thousand miles through Montana and Idaho. After a five-day siege only 30 miles from safety, he surrendered. In his final years, Chief Joseph spoke eloquently of the injustice of United States policy toward his people and held out hope that one-day freedom and equality might come for Native Americans. |
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George C. Marshall (1880-1959) was one of the most renowned military figures in United States history, serving as a General of the Army, Chief of Staff of the Army, Secretary of State and Secretary of Defense. He led U.S. military efforts to victory in World War II. Later, through the Marshall Plan, he built the foundation for the economic rehabilitation of Europe for which he received the Nobel Peace Prize in 1953- the first soldier to receive this honor. |
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With the special and general theories of relativity, Albert Einstein (1879-1955) replaced Newton's view of absolute time and absolute space with a new physics in which time slows down and gravity changes the shape of the universe. Albert Einstein is a symbol of the pursuit of truth through science that knows no national boundaries. As an immigrant to the United States, Einstein fled pre-war Germany and became a United States citizen. As a prize-winning physicist, Einstein replaced centuries of physics with a new and more complete view of the universe. As an international figure, Einstein fought for the cause of peace. He received the Nobel Prize for physics for his work on the photoelectric effect. |
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Marian Anderson (1897-1993) was a world-renowned contralto with a vocal mastery from Bach and Schubert to Verdi and spirituals. In 1939, barred from singing at a concert hall in Washington, D.C., because of her race, Anderson was invited to sing on the steps of the Lincoln Memorial to a record crowd. Her long career started with singing in church as a young girl and took her to the pinnacle of the profession. In 1955, she became the first African American to sing with the Metropolitan Opera. Marian Anderson was loved and admired throughout the world as a great artist whose dignity in the face of discrimination opened doors for the many African-American artists now performing in concert halls and opera houses worldwide. |
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This denomination is no longer available. Spark Matsunaga (1916-1990), a war hero who became a United States Senator from Hawaii, dedicated his career to promoting peace and achieving justice. A Japanese-American, Matsunaga served with distinction in the 100th Infantry Battalion, the first Japanese American unit formed during World War II, for which he received the Bronze Star Medal and two Purple Hearts. As a political leader, he was a champion of civil rights for all Americans regardless of race. As a member of the United States Senate, he worked to promote the peaceful resolution of conflicts, and he fought for redress for survivors of the World War II internment camps |
