EE Series US Savings Bond Review

Overall 4.00 of 5 view all 3 reviews

JovialCougar
Denver, CO

EE Series US Savings Bonds: Low Risk, but Low Rewards

a low risk investor, Small time investor, noticing the details, budget conscious, a man

Pros

Very Low Risk, Fixed and known interest, Easy to buy, Some tax advantages, Use for college savings

Cons

Low interest earnings, Cashing-in Restrictions, Limit on quantity you can buy each year, No inflation adjustment

MAR

2009

If you are not sure where to invest your money US Savings Bonds EE Series may be a good choice for you. Although you will not earn much interest, you will never lose the amount you initially invested. Sound appealing? Read on.

Basic facts

EE Series US Savings Bonds are issued by the US Treasury in denominations ranging from $50 up to $10,000. They can be bought at most banks or at Treasury Direct .com. You pay half of the face value of the bond (e.g., a $50 bond will cost $25 to buy) and over time the interest earned will make it worth the face value. The interest is currently accrued each month and the value will never go down.

How much do you earn?

Over the years the amount of interest paid on EE Bonds has changed. Currently the interest rate on new bonds is 1.20% (Nov. 2009). This rate is subject to change on May 1 and Nov. 1 each year. Bonds issued in previous or future years will have different rates.

Currently the bond will reach its full face value in 20 years. So if you buy a $100 Bond for $50 in 2009, it will be worth the $100 face value in the year 2029. It will earn interest for up to 30 years from purchase date then be ''Fully Matured'' and will no longer earn interest.

Advantages to EE Savings Bonds

There are several advantages to investing in EE US Savings Bonds as follows:

Just about 100% safe
Exempt from local and state income taxes
Can be used for tax-free education savings
No loss of initial investment
Can be re-issued if lost
Easy to buy from banks
Worry free investment
Interest not taxed until redeemed

Disadvantages to EE Savings Bonds

Unfortunately there are some disadvantages to this type of investment, as follows:

Low interest rate
Restrictions on redemption (cashing-in) period
Eventually stop earning interest
No inflation safeguards
Limit on how many you can buy
Sometimes lost/forgotten

Currently you have to wait at least one year before cashing in an EE Bond and if cashed-in before 5 years, you'll lose some interest. Another interesting aspect of Savings Bonds is that billions of dollars worth of mature bonds have never been redeemed ($16 Billion worth according to recent news stories). Over time they get lost or someone dies without anyone knowing they had them.

I bought quite a few EE Series Savings Bonds in the 1990s when the interest rates were better. Now I'm glad I did because I have a little nest egg that I cannot lose. Today the EE Savings Bond is just an average investment choice because you'll get locked-in at a low interest rate and the fixed earnings period. The I-Series Bonds with variable interest rates may be a better choice during periods of inflation. However, if your primary concern is preserving the initial investment and knowing exactly how much money you will earn, the EE Savings Bond may be one of the better investment choices you can make.

Last edited on Nov 03, 2009

EE Series US Savings Bond is recommended by JovialCougar

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Comments about JovialCougar’s Review

Excellent review! I've had my E-bonds for some time and they're the best thing I've got going right now. Today's interest is negligible. I'd think they might be good for folks who have trouble saving. Basically, I've bought them and then forgotten about them with only yearly checks for earnings.

In response to JovialCougar's comment from Mar 25, 2009 at 10:52PM:

Yah, me too! You know, the amazing thing when you track bonds value every month is that you see how bonds that you bought back in 1991 (which is when I started) really begin to accelerate in interest earnings as the years go by. Once they hit that full maturity and go into "overtime" the interest really begins to stack up fast. The more you earn, the more you earn! Now, if the government can just stay in business!

It might take a little typing and patience to enter all your bonds in to TreasuryDirect but it is fun too, plus then you always have a record of your bond numbers at home in case you want to put them in a safety deposit box or something And you'll get so much fun out of updating to get current values as time goes by. I'm glad you did such a great review about EE Bonds, I think more people should start investing in them on a regular basis.

Take care!

In response to AnnaBanana's comment from Mar 25, 2009 at 8:06PM:

Thanks Anna. I'll have to check to see how much they're worth. I see that bonds can be bought on-line from that site, which is something that interests me. I'm glad you were ''dumb'' and bought all those bonds!

In case you are interested in the TreasuryDirect website review, just click on www.viewpoints.com/TreasuryDirect-review-36f14.

I bought quite a few of these by automatic payroll deduction when I worked at the Bank. I used to call it my "dumb investment" and now I'm really glad I was that dumb. Did you know that there is a website where you can list your bonds and automatically update their value every month? To tell you the truth, I forget exactly what it is called and shame on me because I reviewed it a few months ago! The review is out there somewhere!