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Savings bonds
are a great way to save money for your future. Either
purchased yourself, or given as a gift, savings bonds
ensure you that you will have at least some amount of
savings later on.
Although you may already know a little about savings
bonds,
either owning them yourself or having given one as a
gift, you may not know that there are different types.
Each type has its own set of rules and also different
ways that they can be used.
I Bonds
are saving bonds
that are low-risk and also a liquid savings product.
During the time that you own them they earn interest
and also protect you from inflation.
I Bonds
can be purchased at just about any local financial
institution, or also through payroll
deduction.
What are they used for? I Bonds
savings bonds
can be used to finance education, supplement your retirement
income, or also given as a gift.
With I Bonds,
you are guaranteed a real rate of return since they
are an accrual-type security. Each month interest is
added to the savings bond, and that interest is paid
to you when you cash in the bond.
They are sold at face value. For instance, you pay $50
for a $50 I Bond.
You must own an I Bond for a minimum of one year, its
interest-earning period is 30 years, and there are
early redemption penalties. Interest earnings are
tax-exempt from both State and local taxes, but they
are subject to State and local estate, inheritance,
gift, and other excise taxes. Interest earnings are
subject to Federal income tax, but they may be
excluded from Federal income tax when they are used to
finance education.
Another type is the EE savings bonds.
They are safe and low-risk savings bonds
that pay interest based on market rates. As with I Bonds,
EE savings bonds
can be purchased at just about any financial
institution or, if available, through your employer’s
payroll deduction plan.
EE Bonds can be
used to finance education, supplement your retirement
income, or even given as a gift.
Any EE/E savings bond that were purchased between May
1997 and April 30, 2005 are set to earn a variable
market-based rate of return. Those issued May 2005 and
after are set to earn a fixed rate of interest.
EE savings bonds
are also an accrual-type security, having interest
added monthly and paid when it the bond is cashed in.
However, unlike I Bonds,
EE savings bonds
are sold at half of its face value. For example, a $50
bond is purchased for $25.
There is a minimum of one year ownership, a 30-year
interest period, and also early redemption penalties.
The Tax Considerations for EE savings bonds
are the same as those for the I Bonds.
Lastly are HH savings bonds.
Unlike both I and EE savings bonds,
HH are used only to supplement retirement income. They
are available only in exchange for Series EE/E savings
bonds or upon
reinvestment of any matured Series H bonds.
As with I Bonds, HH
savings bonds are
sold for its face value. For example, you pay $500 for
a $500 bond. HH/H savings bonds
pay a fixed interest rate that was set on the day it
was purchased. The interest rate will change to the
current HH Bond rate on the 10 th anniversary of its
issue date.
You must own HH savings bonds
for a minimum of 6 months, and the interest-earning
period is 20 years.
Interest earnings for HH savings bonds
are exempt from State and local income taxes. However,
they are subject to Federal, State, and local estate,
inheritance, gift, and other excise taxes. Its
interest earnings are also subject to Federal income
tax.
By www.gsavings.com
About The Author:
More work of Max can be found at
http://www.gsavings.com
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