US Treasury EE Saving Bonds: Good Idea or A Stinker Idea?

By |2015-05-22T20:10:58+00:00August 10th, 2013|Annuities, Retirement Planning|

Buying a US Treasury EE Bond can be a great idea if you want your funds held long term and have no need for the funds prior to their 20 year maturity.

EE Bonds offer fixed interest rates for the life of the bond. The maturity period for EE Bonds is 20 years, if you redeem the bond in the first 5 years of ownership, there is a penalty affixed.

EE Bonds offer safety, market yield and tax deferred interest compounding. EE Bonds are sold at a face amount in units of $100 and at maturity the entire face amount is returned plus accrued interest.

On the negative side of owning EE Bonds is the fact you cannot sell EE Bonds to anyone except back to the US Treasury. EE Bonds can only be redeemed after you have held ownership for 12 months. The interest offered to you at an early redemption time is very low and by far in the Government’s favor.

In addition to receiving a much lower interest rate than the original rate offered, you will also be penalized with a 3 month loss of interest. As an example, if the EE Bond was offering 3% interest and you redeemed prior to the 10 year maturity date, you may well earn less than 1% under current yields.

US EE Bonds also limit the amount that you can buy in any calendar year, $10,000 per year per social security number.

Current interest rates are very low, 20 year EE Bonds are currently offering .20%.  For additional information, the US Treasury offers  this website:

http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eebuy.htm

When you consider the restrictions placed on byers of EE Bonds and the low interest offered for a 20 year commitment, it makes sense to look elsewhere for your important funds.  If safety and security is key to your needs, bank accounts and fixed rate annuities could be a better choice for a higher yield.

About the Author:

Bill Broich
Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet. To follow Bill's profile, click here.