Investors looking for savings products that offer low risk and steady yield would do well to look into government-backed series EE savings bonds. One of the benefits of this type of investment is that these bonds can be used to finance any number of life events including retirement, tuition costs, graduation gifts, medical costs for seniors, and more.
Series EE savings bonds provide a reliable, steady fixed rate of return. Due to this constant rate of interest, investors of this type of government-backed bond can determine the value of their investment at any given time. In fact, the United States government offers a handy online bond calculator that automatically determines the value of these and other government-backed bonds.
This constant rate of return is one of the newer features offered with government-backed bonds. Prior to 2005, series EE bonds were subject to a variable rate that was based upon Treasury security yields. With a reliable and steady rate of return, it is possible to plan ahead, allowing investors the ability to calculate an expected figure for earnings realized through this type of investment.
While series EE bonds can be purchased as electronic securities, paper versions are commonly available as well. In order to purchase government-backed savings bonds, you can contact almost any financial institution such as a bank or credit union. Additionally, some employers offer an easy-to-use payroll deduction plan for the purchase of US savings bonds.
If you decide to invest in series EE savings bonds in order to save for future expenses, you need to understand a few important facts. As with most bonds, a waiting or maturation period exists for each bond. This timeframe differs depending on whether the investor has purchased paper EE bonds or electronic ones.
With electronic bonds, the investor must pay face value for the bonds, but they are worth their full value at a designated time of redemption. With paper bonds, the investor pays only one half of the face value of the bond. Once the bond matures, it is worth its full value. Typically, it takes at least five years for the bond to mature enough so that the investor does not incur a penalty fee. If the bond is redeemed prior to its maturation, then the investor forfeits the previous three months of interest earned on the bond.
Bonds are sold in multiples of $25. Therefore, common face values for them are $50, $75, $100, $200, $500, $1000, $5000, and $10,000. In order to purchase a series EE bond, the investor must be a United States resident and have a Social Security number. If you have a United States address of record but live abroad, you can also purchase series EE savings bonds provided you are a citizen of the United States.
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