Savings Bonds come in eight values: $25, $50, $75, $100, $200, $500, $1,000, and $5,000. After purchase, the holder must wait at least six months before cashing it in, when they will receive the capital plus some interest. The maturity periods can vary. For example, if you buy a bond with a value of $50 for $25, you'll have to wait at least 17 years to get back your investment from the government, depending on the interest rate. The longer you wait, the greater interest you earn, however savings bonds have a 30-year maximum of interest accrual. After that the bond no longer accrues interest. Savings Bonds are protected because they are secured by the U.S. government. The principal and earned interest are registered with the Treasury Department, so if a bond is lost, stolen, or destroyed they can be replaced at no cost. Savings bonds can also have value as a collectible since the government stopped issuing them in paper form.
Current bond types
- EE-Bonds are fixed interest bonds that are guaranteed to double in face value over 20-years. The rate is fixed upon purchase. Tax is deferred until the bond is cashed. The maximum amount that can be purchased is $10,000 per person per year in electronic form.
- I-Bonds have fixed and variable rate components. The fixed rate is set at the time of purchase. The variable rate is adjusted every 6 months based on consumer price inflation. The variable rate can be less than zero in times of deflation but the combined rate cannot be less than zero. The maximum amount that can be purchased is $10,000 per person per year in electronic form. An additional $5,000 can be purchased using your income tax refund on form 1040.
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