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Savings Bonds Information
Marsha A. Goetting, Ph.D., CFCS
Professor and Extension Family Economics Specialist
If you have parents or grandparents with "old " bonds in their safe deposit boxes let them know that interest on certain ones is no longer being paid.
Series E savings bonds issued between 1941 and November 1965 stop earning interest 40 years from their issue dates. Series E savings bonds issued
starting in December 1965 stop earning after 30 years. Series EE Savings Bonds and I Bonds earn for 30 years and Series HH, for 20. This information was
provided by the Savings Bonds Marketing Office.
**********I Bond protects savings from
inflation**********
A recent addition to the U.S. Savings Bonds family offers a new look and protects your savings from inflation. The Treasury Department introduced the I
Bond in September 1998. The "I" in I Bond stands for "inflation indexed" because part of its total return is
adjusted for inflation. The I Bond is presently earning 7.49 percent. This is a combination of two rates--a fixed rate and an inflation adjustment. The fixed
rate is the real amount you earn over and above inflation. It is currently 3.60 percent for all I Bonds sold between May 1 and Oct. 31, 2000.
The Treasury can adjust the fixed rate each May and November for new I Bonds sold during the following six months, depending on market conditions. An I
Bond's fixed rate remains the same its entire life.The adjustment is the part of the rate that keeps pace with inflation. It is based on the Consumer Price
Index for all Urban Consumers, or CPI-U. The adjustment is set each May and November, but takes effect on each six-month anniversary of an I Bond's
purchase. For example, if you buy an I Bond in January, the inflation rate can change every January and July, based on the rates set the previous November and
May.
The inflation adjustment applies to all I Bonds and can fluctuate over time. This ability to keep up with inflation is key to the I Bond's worth. It means
your money earns over and above the rate of inflation. I Bond earnings are exempt from state and local income taxes. On top of that, you can defer federal
income taxes for the entire 30-year life of an I Bond. If you meet eligibility requirements, earnings are also exempt from federal income taxes when you use
savings bonds for qualified higher education expenses.
For more information, go to www.savingsbonds.gov, or call 1-800-4US-BOND or
1-800-487-2663. You can also write, Savings Bonds, Parkersburg, WV 26106-1328.
**********U.S. Savings Bonds offer tax
advantages**********
U.S. Savings Bonds are a great way to give yourself a break from taxes. All interest earnings from the I Bond and Series EE savings bond are exempt from
state and local income taxes. On top of that, federal income taxes on earnings are deferred until you redeem the savings bonds or until they reach final
maturity 30 years after their issue dates. This means you have the option of redeeming savings bonds and paying taxes on the interest when it's best for
you.
If you own Series E or EE saving bonds, and want to further delay paying the federal income tax on the earned interest, you can exchange them for Series HH
savings bonds. This allows you to defer the EE interest for up to an additional 20 years while getting reportable interest payments twice a year at the HH
rate.
Interest on all Series EE and I Bonds may be exempt from federal income taxes if you use your savings bonds to pay for qualified education expenses. This
education benefit applies to savings bonds issued since January 1990 and some
limitations apply.
For more information on savings bonds, go to www.savingsbonds.gov or call
1-800-4US BOND (1-800-487-2663). You can also write to, Savings Bonds, Parkersburg, WV 26106-1328.
**********Earn tax-free interest for
education**********
The Treasury Department offers a way to make paying for higher education a little less painful. While earnings from U.S. Savings Bonds are exempt from
state and local taxes, you still have to report them for federal taxes. However, if you use savings bond proceeds to pay for qualified higher education
expenses, you can exclude that interest from your federal income tax, too.
Listed below are the guidelines for taking advantage of this feature.
First, the education tax exclusion applies to I Bonds and Series EE savings bonds bought after 1989. You, as a qualifying taxpayer, have to be 24 years or
older before the bond's issue date. The benefit applies to education expenses for you, your spouse or a dependent. If you are married, you have to file a
joint return to get the exclusion.
To qualify for the exclusion, you must use both the principal and interest from the redeemed savings bonds for eligible educational expenses. If you use only a
part of your earnings, the exclusion will be prorated to match the percentage
used. For example, if you use 75 percent of the proceeds from the savings bonds you redeemed in a year for education, you can only exclude 75 percent of the
interest you earned from the bonds you redeemed.
If you plan to use savings bond proceeds for a dependent's education, you can't name that dependent as a co-owner on the bond. However, you can name the
dependent as a beneficiary. If you bought eligible savings bonds in a dependent's name intending to use them for education expenses, you can request
a reissue of the bond in your name. As your income goes up, the amount of exclusion you can claim goes down. For the 2000 tax year, the exclusion starts
to phase out for joint filers at $81,100 and stops at $111,100. The amounts are $54,100 and $69,100 for single filers.
Procedures for redeeming savings bonds for the education exclusion are the same as for other savings bonds. Just be sure to keep a complete record of
redemptions. Separate any savings bonds that are not eligible for the exclusion from the ones that are.
For more information, visit www.savingsbonds.gov and follow the "Education"
link under the "FAQ" heading. You can also write, Savings Bonds, Parkersburg, WV
26106-1328. For more information about savings bonds, call 800-4US-BOND.
*************Find buried treasure in U.S. Savings
Bonds**********
Do you have buried treasure somewhere in your safe deposit box, garage, basement or attic? You might have a box or a drawer holding old U.S. Savings
Bonds that are now worth a lot of money.If so, now's the time to find out just how much they're worth and, more importantly, to find out if they're still
earning interest. If they aren't, the time has come to part with them and put your money back to work for you.
To find out, look at the upper right-hand corner of your savings bonds and find the issue date. Series E savings bonds issued between 1941 and November 1965
stop earning interest 40 years from their issue dates. Series E savings bonds issued
starting in December 1965 stop earning after 30 years. Series EE Savings Bonds and I Bonds earn for 30 years and Series HH, for 20.
This should cover the majority of savings bonds held by most people but more information is available at the Treasury Department's savings bonds website,
www.savingsbonds.gov You can also find out exactly how much your savings bonds
are worth and when they mature by using the Savings Bond Calculator on the same website. With this online program, you can enter all of your savings bonds and
instantly figure their worth. You can also download for free a similar program, the Savings Bond Wizard to use off line.
What do you do if your savings bonds have stopped earning interest? You can do a couple of things. First, you can just redeem them by taking them to a
financial institution. The interest you've earned over the years will be included in your income for the tax year in which you redeem them. Second, you
can exchange your Series E savings bonds for Series HH savings bonds. This defers the federal income tax on your earnings for up to an additional 20
years. This option is available if your Series E savings bonds are less than one year past their final maturity date, and if they total at
least $500.
Check your old savings bonds to make sure they're still working for you. Keep the ones that are, and either redeem or exchange the ones that have matured.
For more information on savings bonds, go to www.savingsbonds.gov or call
1-800-4US BOND (1-800-487-2663). You can also write, Savings Bonds, Parkersburg, WV 26106-1328.
**********Savings bonds aren't what they used to
be**********
If you think that U.S. Savings Bonds are just a nostalgic piece of American history, or that they are plagued with low interest rates, are difficult to
track, and it's impossible to figure out their worth, it's time to take another look. The Treasury Department offers an attractive family of products and
services that make these concerns obsolete.
The I Bond and Series EE savings bond let you choose the way you want to regularly save. They ensure that your money will grow, remain safe, and be
ready for you to use, when you want it. Both series of U.S. Savings Bonds offer competitive rates of return compared with similar forms of saving. Interest on
savings bonds accrues monthly and compounds semiannually. Interest you earn on savings bonds is exempt from all state and local income taxes. Federal income
taxes are deferred until your bonds reach final maturity or you redeem them. If you use your savings bonds to pay for qualified
higher education expenses, you may be able to exclude your earnings from federal income taxes, too. This feature can increase your actual earnings.
I Bonds are sold at face value. That is, a $50 I Bond costs $50. They earn a combination of two rates--a fixed rate and an inflation adjustment that ensures
you earn over and above inflation. The rate for I Bonds bought between May 1 and Oct. 31, 2000 is 7.49 percent.
Series EE savings bonds are sold at half face value; you pay $25 for a $50 EE bond. They earn 90 percent of the average yield on five-year Treasury
securities. This means you consistently earn securities market rates for a fraction of the initial deposit. Series EEs bought from May 1 to Oct. 31, 2000
pay 5.73 percent.
You don't need a pile of cash lying around to start getting these competitive rates. It would be difficult to find another form of saving that pays these
rates for an initial payment as low as $25. You pay no fees or service charges when you buy or redeem U.S. Savings Bonds. Savings bonds are safe. They're
backed by the full faith and credit of the United States. Your savings bonds are registered, so the Treasury Department can replace them if they're lost,
mutilated or stolen. Savings bonds provide accessibility. If you need your money unexpectedly, it's there for you. As with most forms of saving, you get a
greater benefit the longer you let your savings bonds grow, but you can redeem them any time after six months from purchase. If you do so within five years,
you pay an early redemption penalty equal to your last three months of earned interest.
You can buy savings bonds in many easy ways. The Payroll Savings Plan is by far the best. It lets you effortlessly save your money with a payroll allotment on
a regular basis where you work. If you don't have access to payroll savings, and you want a way to regularly buy savings bonds, you can use the EasySaver
Plan to automatically make purchases with an allotment from your account at a financial institution.
Over 40,000 banks, credit unions and other financial institutions sell savings bonds. Many of them also offer savings bonds through their online banking
services. You can now buy savings bonds online directly from the Treasury Department. At the Savings Bond Connection,
www.savingsbonds.gov, you can make purchases 24 hours a day, seven days a week, using a secure credit card
transaction. This is a perfect way to buy savings bonds as gifts or to make other one-time purchases.
For more information, visit www.savingsbonds.gov
or call 1-800-4US-BOND.
You may also write, Savings Bonds, Parkersburg, WV 26016-1328. Prospectus-like information statements on I Bonds and Series EE savings bonds are available,
too.
***********Treasury plan makes saving
easy***********
Millions of people have enjoyed the benefits of U.S. Savings Bonds through the Payroll Savings Plan. This is a program in which employees automatically save
money using an allotment directly from their pay.
Unfortunately, not everyone has access to payroll savings. This group might include farmers, other self-employed, or those who work for small businesses.
In 1998, the Treasury Department started a program that makes it easy for this group to buy savings bonds directly from their accounts at financial
institutions. EasySaver requires one simple registration with a form and a voided check. There are no fees or charges, except for what you pay for the
savings bond itself.
You choose when and how much money you want to save, from two bonds a year on up. You decide which series and denominations of savings bond you buy. Then,
you'll automatically receive your savings bonds on a regular basis. It takes
about four weeks for the initial form to be processed and about two weeks for you to receive your savings bonds after each allotment.
You can download the form at www.easysaver.gov or request one using the
information below. Check first with your financial institution to make sure it allows electronic transfers. With EasySaver, you can buy bonds for yourself,
for others as gifts, or
both. For example, you can set up regular monthly allotments for your personal savings. You can also schedule allotments to coincide with gift occasions such
as birthdays and anniversaries. You won't ever again have to go into your financial institution to buy a savings bond if you don't want to.
Another benefit of EasySaver is that it creates a record of your savings bonds that makes keeping track of them a lot easier.
For more information on EasySaver, go to www.easysaver.gov or call
1-877-811-7283. You can also write, Savings Bonds, Parkersburg, WV
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