Are Savings Bonds A Good Deal Now?

The headline on the article on MainStreet.com read “The Savage Truth: Don’t Buy Savings Bonds”. It shocked the heck out of me.

Why? Because, I thought that U.S. Savings Bonds were at least a nice, safe, OK investment.

But according to the article, there seems to be a few things about new bonds that might not make them a smart investment right now.

And although I don’t want to see unpatriotic, I do feel like I have an obligation to share with you any ideas that might affect your finances - so you can make your own decisions.

Now, according to this article by Terry Savage, older bonds seem to be a good deal. But the newer bonds, like Series EE, carry low fixed rates that can’t keep up with inflation. In fact, the EE bonds have a fixed rate of just 1.4%. And if you buy them before November 1st, they’ll have that rate for the next 20 years until they reach maturity. If you hold these bonds for the full 20 years until maturity, they’ll reach their “face value” and provide you with an effective yield of 3.6%.

I don’t know about you, but waiting 20 years for a 3.6% return doesn’t rock my boat. And then, after you redeem the bonds, you have to pay federal tax on the interest you earned.

But if you own older EE bonds or Series I bonds, you might have a great deal on your hands. If you’re thinking of cashing them in before they mature, find out what their guaranteed base rate is by going to TreasuryDirect.gov.

In any case, if you own savings bonds or are thinking of buying some, please check out Terry’s article to get an in-depth look at how savings bonds work. And then you can decide if they’re a good deal for you or not.