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They call it Bond, Savings Bond |
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Savings bonds can be a great addition to your financial portfolio. You need to know what a savings bond is, as well as if it is right for you in your current situation. |
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| Author: James Miller |
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A savings bond represents a loan made to the United States, basically an IOU. Bonds are registered securities backed by the full faith and credit of the United States. Your principal and earned interest are safe and cannot be lost because of changes in the stock market.You are paid a specified rate of interest during the lifetime of the bond and the face value when the bond comes due or matures.
Once issued, bonds cannot be sold or used as collateral nor can they be signed over to anyone; the payee must be present to redeem the bond. There are many types of bonds such as: United States government bonds, foreign government bonds, municipal bonds as well as others.
Bond types
Some of the popular US government bonds are Series EE, I Bond, Patriot Bond and Series HH.
Series EE and I Bonds are accrual securities. They accrue interest monthly at a variable rate and the interest is compounded semi-annually. You receive your interest earnings plus the face value when you redeem an I Bond or Series EE Savings Bond.
Series HH Bonds are current income securities so you receive your earnings semi-annually and you receive the face value of Series HH Savings Bonds when you redeem it.
Patriot Bonds are Series EE bonds that signify your support in the war against terrorism.
Bond Prices
You can buy savings bonds for as little as $25. Participants in Payroll Savings may buy them in even smaller installments. The Treasury Department never charges fees or service charges when you buy or redeem savings bonds. Because paper savings bonds come in eight denominations-$50, $75, $100, $200, $500, $1,000, $5,000 and $10,000-you can tailor your purchases to meet your goals and needs.
Bond Maturity Timeframes
The date that a savings bond stops earning interest is called its final maturity date. I Bonds and Series EE Savings Bonds stop earning interest at 30 years from the issuing date. Series HH Savings Bonds stop earning interest at 20 years from the issuing date. After the initial 12 month holding period, you may redeem your savings bonds at any time you like. However, if you redeem I Bonds or Series EE Savings Bonds earlier than five years from the date of purchase you will have to pay an early redemption penalty equal to the last three months of earned interest.
You should redeem your I Bonds no later than the year in which they reach their final maturity and be sure Interest earnings are reported to the IRS for your federal income taxes in that year but thank fully the interest earned on savings bonds is exempt from both state and local income taxes.
So in short, if you are looking for a safe way to increase your investment portfolio you might want to consider bonds, just remember they are designed for long term investing.
About Author
This article was written by James Miller a 10 year veteran of the banking industry. He is a regular poster on http://www.MyChangingLife.com and you may find more from him in their finance section. MyChangingLife.com is a lifestyle site with information on diet, beauty, health, fitness, finances, home based businesses and much more!
Article Source:
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