U.S. savings bonds

A Case for US Savings Bonds in 2023

For many, United States Savings Bonds have been a part of our lives. We have purchased and or received them for the birth of child, wedding gifts, saving for college, and saving for retirement. Historically, you purchased them at your local bank and received a paper bond from the U.S. Treasury Department (Treasury).

In the past, federal employees participated in the U.S. Savings Bond Drive and purchased bonds through their payroll allotments. I purchased bonds during my 36-year federal career and even recently in retirement. I started with 50 and 100-dollar bonds. Then I moved up in denominations, because it was easier to accumulate larger size bonds instead of a lot of smaller ones. I owned dozens of them. I kept a detailed list of them. Over the years, I cashed in many of them if I needed to make a major purchase or once they matured after thirty years. At maturity, the bond will stop accruing interest. Once you cash them in, you must pay federal tax on the interest earned. The IRS will send you a 1099.

Technology has changed the way federal employees can purchase saving bonds. Employees no longer can do this through their payroll deductions unless their agency’s payroll department has the desire to set it up with Treasury Direct. Otherwise, employees can purchase them directly through https://www.treasurydirect.gov/.

This is an easy way to purchase savings bonds and you can do it with as little as 25 dollars for a 50-dollar bond. The EE bonds or the I bonds are excellent investments. Presently, EE bonds have a 2.10 % interest rate and I bond have a 6.89% interest rate. These rates change periodically. The difference is that the EE are purchased 50% of face value and after 7 to 10 years they reach their full-face value. If you hold onto to the EE bond to final maturity of 30 years, they can be valued much higher than their face value due to an additional 20 years of accrued interest. I Bonds are purchase by their face value and they can be cashed in any time after 6 months. You pay tax on the accrued interest income only when you cash in the bond. Interest earned from US Savings Bonds are exempt from state income tax.

So why should federal employees consider savings bonds? Federal retirees have their federal retirement annuity, their social security benefits and their Thrift Savings Plan. That is a three legged stool for their retirement. Savings bonds provide a four legged stool and it strengthens an employee’s retirement as well as provides a tax deferred investment.

In summary, I have purchased and owned savings bonds for over 40 years. Again, I cashed in many of my smaller 50-dollar and 100-dollar bonds because they were taking up too much space and I was afraid of losing them. The online account eliminates the worry of losing them and when they mature or when you need to cash them in, the proceeds go directly back to your bank account.

I have been retired for one year. Today, I have savings bonds that have reached full maturity and I have started cashing them in. Now that I am retired, I am in a lower tax bracket and I have wonderful plans to use this money which I did not think about 30 years earlier. Federal Employees and Retirees should seriously consider purchasing savings bonds. Financial success can easily be achieved; it only takes a little effort.

Abraham Grungold is a retired federal employee with 36 years of federal service, and through his company AG Financial Services he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 50 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.

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