How to Choose U.S. Saving Bonds

Savings bonds may be used for future education expenses.
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Whether you are purchasing U.S. savings bonds to finance education, supplement your retirement income or to simply give as a gift, you may become overwhelmed when it comes to choosing the option that is best for you. When you look at the options, consider if your primary goal is to pay less upfront or to earn more with interest an inflation rate on the back end. Either way, U.S. savings bonds have tax benefits and earn more interest than other savings options.

Step 1

Research the different types of U.S. savings bonds and determine which one is right for you. There are two types of savings bonds that are available to consumers–the Series I and Series EE. The Series I option is sold at face value and is adjusted twice a year and is indexed to inflation; it earns two parts of returns. One part of the return is the rate that is fixed for the life of the bond and the other part is the rate of inflation. The Series EE is sold at half the cost of face value and the interest is earned at 90 percent of marketable five-year treasury securities’ average return. This option is also reviewed on a semiannual basis.

Step 2

Determine how much you can afford and are willing to spend. Both the Series EE and the Series I options offer denominations as little as $50 to as high as $10,000. The interest earned is exempt from local and state income taxes and the federal taxes are deferred until the maturity or redemption date. In the event that you need to redeem the bond prior to the five-year term, there is only a small penalty fee and the bond can be redeemed from any financial institution as long as it has been held at least 12 months.

Step 3

Purchase the bonds through a financial institution, a payroll savings plan or the Savings Bonds EasySaver Plan. The easiest option for purchasing U.S. savings bonds is through your payroll via the payroll savings plan. You can make adjustments to the amount that is taken from your check each pay period and some employers offer the option to allot as little as a few dollars per pay period. If you prefer to purchase the bonds through a financial institution, you can easily visit the institution and purchase them over the counter. The Savings Bonds EasySaver Plan automatically debits your checking or savings account.

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