Facts You Need To Know About Savings Bonds

posted on Monday, May 29, 2023 in Financial Tips

If you’re looking for an alternative way to save and invest your money, consider getting savings bonds. They are investments issued by the government to help fund federal spending and other projects required to manage the economy. They provide the investors with a modest return later on.

There are two main types of savings bonds: Series EE and Series I. EE bonds have a fixed interest rate when you buy them now, while I bonds earn a rate that fluctuates frequently. If you want to learn more about savings bonds, here are some facts:

Safe, Low-Risk Investments

Savings bonds are low-risk investments. It is because they are issued directly by the US Department of Treasury, meaning the full faith and credit of the government backs them. Whenever the treasury sells bonds, it takes a loan from the public. And since it has never defaulted on its debt, this ensures that you will receive your investment in the future.

Long-Term Investments

Depending on the savings bond you get, it will take about 15-30 years before it fully matures. The investor will then have to wait at least 12 months after the initial purchase before redeeming the money.

It’s worth noting that with EE bonds, your investments are guaranteed to double after 20 years, and they will continue to gain interest until they’re 30 years old. Meanwhile, I bonds will only accrue interest until the 30th year. Keep in mind that if you redeemed before the fifth year, regardless of what type of bond you purchased you’d have to forfeit the interest from the previous three months.

Exempt From State and Local Income Tax

Savings bonds are exempt from state and local income taxes, whether you invested in Series EE or Series I savings bonds. They are, however, subject to federal income tax. Those taxes can still be deferred until you redeem the bond, it reaches its 30-year maturity, or it gets transferred to someone else, whichever comes first.

Many people are turning to this type of investment to help increase their finances since they can safely put their time and money into it. If you need a financial institution to help manage your savings, look no further than Community 1st Credit Union. Our C1st representatives will be ready to discuss what can be done to achieve your financial goals.