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Savings Bonds
A Look at a Series of Choices

When it comes to savings bonds, there are series of choices you need to make, many of which are determined by your time frame and savings goals.

The Series EE savings bond is sold on a thirty year basis. This doesn't mean you need to hold the bond for thirty years, but worse case scenario has the face value of this bond reaching maturity in - at worst - thirty years.

You can buy these bonds in the following denominations: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. These are purchased at half their face value and when they reach maturity - usually about seventeen years - they can be cashed for the full amount. You do pay federal taxes on these but not state and local taxes. The interest rate is adjusted every six month so be sure when you cash these types of bonds in, you do it after the interest has been paid in March and November.

The following information is available at the Treasury Department's Public Debt Information site:

FOR SERIES EE BONDS ISSUED MAY 1, 1997 AND AFTER...
Series EE bonds with May 1997 and later issue dates increase in value every month. The bond's interest rate is compounded semiannually. The rate that Treasury announces each May and November for these bonds is applied to a bond for the 6-month earning period.

If you cash such a bond before it's five years old, you give up the last 3 months worth of interest. For example, if you buy a bond in May 1997 and cash it 24 months later in May 1999, you get your original investment back plus 21 months of interest. The value of the bond would be based on the announced rates applied over the 21-month period from May 1997 to February 1999.


FOR BONDS ISSUED BEFORE MAY 1, 1997...
For most bonds issued earlier than May 1, 1997, interest is added every six months; however, there are exceptions for bonds issued March 1993 through April 1995 - these bonds increase in value the first of every month for at least five years. If you know the month and year when your bond was issued, the tables below will help you determine exactly when your bonds increase in value.

It's a good idea to cash a bond in a month in which interest is added to its value. For example, a bond with an issue date of February 1990 increases in value every August 1 and February 1. If you cash this bond in July, you'll receive the same amount as if you had cashed it the prior February; but if you wait until August 1 to cash the bond, you'll receive another six months of interest.

NOTE: Series E bonds issued May 1941 through November 1965 stop earning interest 40 years from the date of issue. Series EE/E bonds and savings notes issued December 1965 and later stop earning interest 30 years from the date of issue.


SERIES EE BOND SEMIANNUAL INTEREST ACCRUAL DATES
The following bonds increase in value as shown below:
• Series EE bonds issued before March 1993,
• Series EE bonds issued May 1995 through April 1997, and
• Series EE bonds issued from March 1993 through April 1995 that are more than 5 years old

Series HH bonds are issued when the bond holder wants to extend the tax deferral of the Series EE. With a Series HH, you can get an additional twenty years before you are taxed on the gains. If you haven't done this prior to September 1, 2004, you can't do it anymore.

Series I bonds are designed to offset the impact of inflation. They have a base rate with a semi-annual compounding of rate designed to beat inflation. When interest rates are rising and inflation is present, the real return can make these a good investment.

here are the differences: A Series EE Bond is: Issued at 50% of face value. (A $100 EE Bond costs $50.) A Series I Bond is: Issued at face value. (A $100 I Bond costs $100.)

A Series EE Bond is:Offered in 8 denominations ($50, $75, $100, $200, $500, $1,000, $5,000, and $10,000). A Series I Bond is:Offered in 8 denominations ($50, $75, $100, $200, $500, $1,000, $5,000, and $10,000).

A Series EE Bond:$30,000 issue price annual purchase limit per person. A Series I Bond:$30,000 annual purchase limit per Social Security Number.

Interest is calculated as 90% of 6-month averages of 5-year Treasury Securities yields. Calculated as an earning of a fixed rate of return and a semiannual inflation rate based on CPI-U.
A Series EE Bond:Rates announced every May 1 and November 1.
A Series I Bond:Rate Announcement: Same as EE. A Series EE Bond is:Guaranteed to reach face value in 20 years. A Series I Bond is:No guaranteed level of earnings.

A Series EE Bond:Increases in value monthly and compound semiannually. Interest is paid when the bond is redeemed. Generally increases in value monthly and interest compounds semiannually (except in periods of deflation when the bond value could remain unchanged).
A Series I Bond:Interest is paid when the bond is redeemed.

A Series EE Bond:Earns interest for up to 30 years. A Series I Bond:Life span: Same as EE.

Cashing:
A Series EE Bond: Can be cashed any time after 12 months. A Series I Bond:Same as EE.

A Series EE Bond:A 3-month interest penalty applies to bonds redeemed during the first 5 years. A Series I Bond:Same as EE.

A Series EE Bond:Financial institution reports interest earnings (difference between redemption value and purchase price) on IRS form 1099-INT. Savings bonds are exempt from state and local income taxes. A Series I Bond:Same as EE.

A Series EE Bond:Eligible for tax benefits upon redemption when used for qualified education expenses. A Series I Bond:Same as EE.

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