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Tue October 8, 2013
Why Buy U.S. Savings Bonds?
Are U.S. savings bonds still a worthwhile investment? KPLU financial commentator Greg Heberlein thinks so.
Even with all the government shutdown shenanigans in Washington, D.C., Greg says savings bonds are still one of the safest investments you can buy.
In addition to safety, savings bonds are ideal for savers of modest means who need to sock a few dollars away each month. You can buy a savings bond for as little as $25.
How Much Interest Do They Pay?
Interest rates remain at historic lows for all kinds of bonds. Saving bonds are no exception.
Series EE savings bonds are currently being issued with a 0.2 percent interest rate.
Series I bonds, which are tied to the rate of inflation, are currently earning 1.18 percent interest.
Interest rates for savings bonds are set twice a year, on May 1 and November 1.
Can You Still Buy Savings Bonds at the Bank?
No. Last year, to save about $15 million a year, the government established an electronic means of buying savings bonds and all other treasury securities. No paper changes hands.
The site to go to is treasurydirect.gov. It only takes a few minutes to set up an account there and start buying bonds.
What Else Can You Do at treasurydirect.gov?
Besides savings bonds, you can buy treasury bills, notes and bonds, and TIPS – treasury inflation Protection Securities.
There are other services at treasurydirect.gov. For example, if you’re buying treasuries, and you’d like to know when the next auction is, you can set up an automatic mechanism whereby the treasury will send you notices of when an auction will occur.
Can’t I Just Go to a Stockbroker and Do All of This?
Not for savings bonds. They can be acquired only directly from the treasury. But a broker can help you buy other treasury securities.
There are two things to keep in mind when buying bonds with a broker.
First, you likely will have to invest a minimum of $1,000.
Second, you might face fees for your transactions. In Greg’s case, when he asked his brokerage to buy a bond, it told him the fee would be $25. But the person he spoke with actually encouraged him to go to treasurydirect.gov.
Can I Buy Savings Bonds with Automated Withdrawals from My Paycheck?
Your employer can offer that option. The company sets up a payroll direct deposit account in your name with the treasury and you decide how much to transfer and how often.
What If I Want to Give a Savings Bond to Someone Else?
This is one element that’s more difficult than before.
The recipient needs to open a treasurydirect.gov account to access the savings bond or you need to keep the bond in your account.
If it’s a child, then the parents will have to take of opening the account, essentially as if a bank account were being opened for a child.
What If I Don’t Have a Computer?
Millions either don’t have a computer or don’t access the internet (e.g., 44 percent of those aged 65 and over). So that’s a tough situation.
Ask a close relative or friend to set up an account in your name. Otherwise, you might just have to make a cash gift.