Can US Savings Bonds Be Purchased Without Refund Money?

Investing in savings bonds carries online convenience.

Investing in savings bonds carries online convenience.

Setting money aside for your future puts you and your partner ahead of most couples. Including U.S. savings bonds in your investment strategy enables you to tap into an often-overlooked avenue to safe, steady wealth-building. The U.S. Department of the Treasury offers three ways to enter the savings bond arena: your federal income tax refund, a payroll savings plan and self-directed purchasing.

Digitally Speaking

In 2004, the federal government brought savings-bond investment into the digital age when it launched TreasuryDirect, a secure website that serves as the purchase, holding and redemption center for Series I and Series EE savings bonds. Investors set up a TreasuryDirect account where their savings bonds reside in the form of electronic certificates until redemption. In addition to Internet access and an e-mail address, you need a Social Security number and bank or savings account to establish a TreasuryDirect account. Establishing an account takes 10 minutes, according to TreasuryDirect. With the exception of tax refund purchases, TreasuryDirect is the sole source for savings bonds. Bonds purchased without a TreasuryDirect account will not appear in your account activity summary. However, the site includes a feature called "Treasury Hunt" that helps owners identify paper bonds that have reached maturity or request replacements for those that have been lost, stolen, damaged or never received.

Refund Purchases

When you buy savings bonds with your federal income tax refund, you have two options as of 2012: Receive a paper Series I bond in the mail or have an electronic version deposited into your TreasuryDirect account. Internal Revenue Service form 8888 handles both options. Investors also can request state tax refunds be sent to their TreasuryDirect account, from which they can buy savings bonds. How much of your refund you invest is another choice. However, refund purchases must be in multiples of $50. Overall, an individual must limit bond-buying to $20,000 per year: $10,000 in Series I and $10,000 in Series EE.

Payroll Savings

Employees can have any amount from their pay sent to their TreasuryDirect account, unless their employer imposes a limit. Using the "set up a payroll savings account" link shown after logging onto your TreasuryDirect account, you indicate the type and dollar denomination of bonds you want to purchase. Next, complete plan enrollment forms required by your employer. In exchange for your deposited money, TreasuryDirect gives you a payroll certificate of indebtedness, or COI. When your COI reaches your desired bond price, TreasuryDirect automatically buys your savings bond with it. For example, if you choose $500 bonds and deposit $100 from every paycheck into your TreasuryDirect account, TreasuryDirect will credit a bond to your account every five paychecks. Your purchase appears in your account the next business day. A COI does not earn interest; it sits in your account until you make a purchase or decide to redeem it by having the funds transferred to your bank account.

Self-Directed Savings

If your employer doesn't offer a payroll savings plan, you still can purchase bonds through TreasuryDirect. Simply arrange for money to be transferred from your bank account to your TreasuryDirect account. You may opt for automatic transfers, too. The purchase procedure mirrors that of a payroll savings plan; only the source of your funds differs. As with payroll savings, bond denominations range from $25 to $5,000 and can be purchased as gifts, provided the recipient has a TreasuryDirect account.


All U.S. savings bonds have a one-year minimum ownership period before which they cannot be redeemed. You can choose full redemption to get the principal and interest earned to date, or partial redemption, as long as the minimum amount involved is $25. A partial redemption must leave at least $25 of value on the bond. TreasuryDirect automatically redeems any Series EE or Series I savings bond when it reaches maturity 30 years after the issue date. When you request a redemption, you specify whether the money gets transferred to your bank account or buys a new COI to be kept in your TreasuryDirect account.


About the Author

Trudy Brunot began writing in 1992. Her work has appeared in "Quarterly," "Pennsylvania Health & You," "Constructor" and the "Tribune-Review" newspaper. Her domestic and international experience includes human resources, advertising, marketing, product and retail management positions. She holds a master's degree in international business administration from the University of South Carolina.

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