Overview:
Savings Bonds are one of the oldest and easiest to understand investments offered by the U.S. Government. They are considered an “accrual” type investment, which means that their value increases over time.Series EE Bonds are purchased at half of their maturity value, and slowly increase towards that amount. Series I Bonds are purchased in denominations of $50 to $10,000, and slowly grow in value according to prevailing interest rates.
The government, as an incentive to purchase Series EE and I bonds, allows the growth in value to be exempt from Federal and state taxation if cashed out and used to pay college expenses.
Ideal Investor:
Series EE and I bonds should be considered by individuals who meet some or all of the following criteria:- They prefer the safety and simplicity of Savings Bonds over the risk and complexity of other investments and account types.
- They are satisfied with an annual rate of return in the range of 4-6%.
- They are in the highest Federal and state income tax brackets.
- They can only invest smaller amounts at irregular intervals.
- They want to retain ownership of the asset until they decide to use it.
