Are Savings Bonds Safe To Buy?

In this blog post I will help you answer the question Are Savings Bonds Safe To Buy? We will also see if Bonds are something that you should invest your money in long term. If you already know about Saving Bonds then read some of my other post at the bottom of this blog or clicking here.

What Are Savings Bonds?

Yes I am going to be that guy and give you the definition and then tell you about buying them. On the SEC website it states that

Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

Bonds are sold at face value so buying a $50 one will get you a $50 bond. On the website, it talks about the two different kinds of bonds that you can buy that have requirements.

Series EE U.S. Savings Bond:

are an appreciation-type (or accrual-type) savings security. They are sold at face value, so you’ll pay $50 for a $50 bond. The bond is worth its full value upon redemption. The interest is issued electronically to your designated account. You cannot buy more than $10,000 (face value) during any calendar year. If you redeem the bonds in the first five years of buying them, you’ll forfeit interest payments for the three most recent months. After five years, you won’t be penalized for redemptions.

Series I U.S. Savings Bond:

are inflation-indexed. They are sold at face value and you can buy up to $10,000 (face value) in any calendar year. Series I Bonds offer a fixed rate of interest, adjusted for inflation. As with Series EE Bonds, if you redeem Series I Bonds in the first five years, you’ll forfeit the three most recent months’ interest. After five years, you won’t be penalized for redemptions.

Do I Pay Taxes on Bonds?

With Savings Bonds you don’t have to pay taxes on the interest for local and state. You will only have to pay federal once you decide to cash it in. Just know that if you decide to wait until the bond matures, you will get the most money but it will be about 20 years.

Side Note: You will stop getting interest on the Bond after 30 years

What is the interest rate?

The Series EE is going to get you an annual fixed rate of 0.10%. As for the Series I, you will get a rate of 2.22% which is adjusted for inflation every six months.

Which one should I buy?

While this is based on my own opinion, the best bond to buy will be the Series I U.S. Savings Bonds. The main reason for this is because of how good the interest is. You can buy the other bond if you chose to, but the interest you will get is nowhere near 2.22%. Below is a person’s summary of his take on Series I bonds from reddit


-Inflation-adjusted return plus fixed rate means, at a minimum, are matching inflation

-Cannot decrease in value

-Are extremely safe (U.S government-backed)

-Funds transferred from sale of bond to bank account within a few days

-In high-interest environments, you lock in a great fixed rate (e.g., 3.60% in 2000, composite rate for these is ~6% currently) for up to 30 years

-Beats interest rate of even “high-interest” banks

-TreasuryDirect website employs two-factor authentication for added security


-Many find the TreasuryDirect website to be not user-friendly

-If theft of bonds occurs in TreasuryDirect account, there are no guidelines helping you to retrieve lost funds (there are guidelines for paper bonds, however)

-Equities, especially in low-interest environments, will likely beat Series I bonds over the long-term

-Have to lock up funds for one year, forfeit three months of interest if sold before five-year mark

Below are some videos to further help you understand…

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