Types of US Savings Bonds
If you are going to be investing in US Savings Bonds, one of the most important things that you need to learn is what types of US Savings Bonds are available to invest in. Learning about each type of US Savings Bond is important because they each have different rules for investing. Currently there are three different types of US Savings Bonds that you can buy, there used to be four, but the Series HH/H Bonds are no longer being offered.
Treasury bonds are a type of bond that pays a fixed rate of interest every six months until they are fully mature. The maturity date on each Treasury bond is 30 years after they are issued, so if you buy a treasury bond in April 2010 and one in September 2010, the bond bought in April will mature in April 2040 and the one from September will mature in September of 2040. The best place to buy Treasury Bonds is from the website www.treasurydircet.gov. When purchasing a Treasury bond you will need to make a minimum purchase of $100, the investment increments for these types of bonds are in multiples of $100. If you are purchasing a non-competitive Treasury bond, you can purchase up to $5 million in a single auction, if it is a competitive Treasury bond you can only purchase up to 35% of the offering amount. Once the Treasury bond has matured, the owner of the bond will be paid the face value of the bond.
EE/E Savings Bonds:
This type of Savings bond is considered a low-risk investment. If the bonds were bought May 1997 through April 30, 2005, they will pay interest based on the current market rates for 30 years, which is the maturity date of these types of bonds. If you cash the bond in early, you will no longer be able to earn interest. Any of the Savings Bonds that were purchased after May 2005 will earn a fixed rate of return. These styles of bonds can be used to supplement your retirement income, be given as a gift or used to help finance an education. If you were to purchase a Series EE/E Savings Bond they would currently earn a fixed rate of interest of 1.20%, this rate is in effect until April 30, 2010. If you choose to purchase a paper bond certificate, you must purchase a minimum of $25 for a $50 EE Bond. If you purchase it electronically, you will spend $25 for a $25 EE Bond. The maximum amount you can spend is $5,000, both in electronic and paper bond certificates.
I Savings Bonds:
Like Series EE/E Savings bonds Series I Savings Bonds are low risk investments that can be used to supplement your retirement income, give as a gift, or use to finance an education. The one difference between the two types of Savings Bonds is that the Series I is considered a liquid savings product, you earn interest while you own them, but they also protect you from inflation. The annual interest rate of a Series I bond combines a fixed interest rate with a semiannual inflation rate. The interest that you accrue on this type of bond is added to the bond monthly and then paid to you when you cash in the bond. The current interest rate on Series I Savings Bonds is 3.36%, which is current until April 30, 2010. If you are purchasing a paper bond certificate the minimum amount you will need to invest is $50 for a $50 I Bond, if you are purchasing it electronically the minimum amount is going to be $25 for a $25 I Bond. The maximum amount that you can invest in the Series I bond is $5,000, both electronic and paper bond certificates have this maximum amount.