Airing Sunday, February 6, 2005
U. S. savings bonds are solid, dependable investments. That’s why they’re a classic. But even classics can get updated, and bonds have changed to fit the times. Today we’ll look at new and improved savings bonds with the help of our old standby, Jim Lineweaver, founder of the Linewweaver Financial Group.
Question: What is an I Bond?
Answer: I Bond are low-risk, liquid savings products backed by the U. S. Government. While you own them, they earn interest and help protect your savings from inflation.
Question: What are its rates?
Answer: The I Bond earns interest based on a composite rate consisting of a fixed rate for the life of the bond and an inflation rate that changes twice a year. The Bureau of the Public Debt announces new rates each May and November.
I Bonds earn interest from the first day of their issue month. You can redeem them at any time after a 12-month minimum holding period.
They are an accrual-type security. They increase in value monthly and the interest is paid when you cash the bond.
I Bonds are sold at face value and they can grow in value with inflation-indexed earnings for up to 30 years.
Question: What are some advantages of investing in I Bonds?
Answer: Earnings are exempt from state and local income taxes and you can defer any accumulated interest until you redeem the bond or the bond stops earning interest 20 years from issue.
Under the Education Savings Bond Program, you may be able to exclude some or all I Bond interest from Federal Income tax when you pay qualified higher education expenses at an eligible institution or State tuition plan in the same calendar year the bonds are redeemed.
Question: Now, there’s a relatively new way to invest in I Bonds. Can you explain?
Answer: I Bonds are now paperless. They were once sold and redeemed solely as a paper security, but now they’re also available in electronic, paperless form from www.treasurydirect.gov.
Question: Are paperless bonds treated any differently?
Answer: Both paper and paperless bonds are sold at face value, and there is a $30,000 maximum purchase in one calendar year.
Paper I Bonds can be purchased in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. They are issued as paper bond certificates.
Paperless I Bonds can be purchased in amounts of $25 or more, to the penny. They are issued electronically to your designated account.
Question: Do you recommend I Bonds?
Answer: Depends on the person. They’re safe, relatively liquid, and provide a decent interest rate that goes up with inflation. I like them for those reasons. But if you’re looking for 5-8% interest or higher, or growth that goes up with the stock market, you can’t get that with I Bonds.
If you’ve been “eye”ing I Bonds, now might be the time to really take a close look. My thanks to Jim Lineweaver for opening our eyes to this unique savings opportunity.
Jim Lineweaver is a registered representative of and offers securities through Walnut Street Securities, Inc. (WSS) Member NASD/SIPC.
Branch Office:
9050 Sweet Valley Drive,
Valley View, OH 44125
216-520-1711
WSS does not offer tax or legal advice.
Lineweaver Financial Group is not a subsidiary or affiliate of WSS.
Material discussed is for information purposes only and should not be the basis for any investment decisions.
