B is for Bond.
These are questions most people ask when they consider buying savings bonds. Yes, your investment in savings bonds is one of the most safe investments you can make. You’re purchasing the bond and giving the government cash, which they pay you interest back on at a later date. It’s rather like the government borrowing a small amount of money from you, and paying interest on the loan.
Savings bonds are issued by the United States government.
They’re non-transferable, which simply means they must be sold by the government. You can buy savings bonds in a variety of denominations, with $50 and $100 savings bonds being quite popular amounts. You pay less than face value for the bond, and it begins earning interest so that when it matures, usually in several years, the bond is worth the face value. Most bonds will continue to earn interest for years after maturity, so by the time you cash in a bond it can be worth much more than its face value. Some bonds will continue to accumulate interesting for up to 30 years, so if you wish you can leave your investment long-term and still continue to earn profits.
Because savings bonds are registered securities, they’re replaceable.
If they’re damaged, stolen or lost, there is a record of your ownership of the bond so you don’t lose your money. And the amount of a savings bond can never go down, so the money you invest in a bond cannot be lost. Savings bonds are also fairly fluid—the money isn’t locked away so that you can’t get to it in the case of an emergency. But if you cash in a bond early, you won’t see the full return as it won’t be worth its face value yet. And bonds cashed before 5 years are also subject to an interest penalty. But for some, that risk is worth knowing that they can withdraw cash from their investment at any time.
When you purchase savings bonds, you do have to pay Federal Income Tax on the interest they earn.
But you can ease this burden on yourself—a wise choice if you have multiple high-value bonds—by paying the tax on this interest yearly. Or you can opt to wait until the bond is cashed in and pay this tax in one lump sum. You’ll only pay federal tax on bonds, not state or local tax, and if you use the bonds toward education, taxes are sometimes waived.
The two types of bonds you can purchase today are Series EE bonds or Series I bonds.
For Series EE bonds (also called Patriot Bonds) you’ll pay half the face value and it will draw interest every month for 30 years. Series I bonds also accrue monthly interest for 30 years, but you pay full face value for the bond and the interest rate varies with the current inflation indexes.
Photo Credits: 1
Originally posted 2008-12-23 05:49:16. Republished by Old Post Promoter
Related Articles -
What Are the Best Small Investments? [caption id="attachment_353" align="alignleft" width="240" caption="D.R.I.P.s"][/caption] In times of uncertain economic future, it is important to look at your investment strategy and tweak it as needed. One of the ways that you can improve your portfolio is to take on small investments with lower risks associated with them. Taking in smaller...... -
To Borrow or Not to Borrow against a 401K Question - Because of the credit crunch, is this a good time to consider borrowing against a 401(k) savings as a means of paying off other loans? My current 401(k) planning investment return is 5 percent, and the interest I will be paying on it is 9 percent. [caption id="attachment_263"...... -
Should You Be Worried About the Economy? [caption id="attachment_74" align="alignleft" width="240" caption="If you are worried about gas, try carpooling."][/caption] If you follow the news, chances are the state of the economy may have you a little concerned. Bad news is rampant, the housing market is shaky and doom appears to be around every corner. While there are...... -
Child Savings and Investment [caption id="attachment_451" align="alignleft" width="203" caption="Are you investing for your child?"][/caption] Having children is not cheap by any means these days, especially when you consider the long term basis. The older your children get, the more they will end up costing you, especially when you consider education costs which are rising...... -
Teach Your Teen About Saving Money One of the biggest reasons why having a teenage child can be difficult is because teenagers tend to spend money easily and freely without any real regard for what goes into earning that money in the first place. Teenagers tend to spend a great deal of money on clothes, shoes,......
Related Sites - Baseball Cards Sports Memorabilia -> Autographs, Original -> Baseball-MLB-> Trading Cards Baseball cards have been around for just about as long as the sport has and many of them have turned into very valuable collector items. Whether you are interested in collecting baseball cards from a fan perspective, or you are more......
-
Online Savings Banks Lower Interest Rates This is one of those times that I wish my money were in a 5-year certificate of deposit instead of a high yield savings account. About a week ago, I got news from WTDirect that they lowered their savings account interest rate to 2.81% APY. Then HSBC Direct followed suit...... -
Real Estate Investments - Good Idea or Bad Idea? Right now, if there was a market that had bad news written all over it, it would be real estate. The housing crisis has made investors jumpy, the economy appears to be tanking and home values are plummeting across the country. Would you believe that this is actually a good...... - How to Become a Millionaire Step Four - Invest The fourth step in the how to become a millionaire series is to invest your money. By now, you are earning money, spending less than you earn, and saving the difference. But simply saving money will not make you a millionaire - you need to make your money work for......
-
Personal Balance Sheet, May 2008: Net Worth +42.15%! Each month, I post an analysis of my finances and my end-of-month net worth. For more on why I do this, please take a look at my explanation post. May was an uncommonly, unconventionally successful month. Unfortunately, most of the "growth" was from money we technically already had but weren't......
Tags: amount of money, denominations, face value, federal income tax, government cash, interest on the loan, interest penalty, Investments, maturity, profits, risk, savings bond, savings bonds, united states government, wise choice