A Guide to Buying United States Savings Bonds

U.S. Savings Bonds

United States savings bonds are debt securities that the Department of Treasury has issued as a means to pay for the government’s debts. They are believed to be among the safest methods of investing because they are completely backed by the U.S. government itself.

How Can You Purchase U.S. Savings Bonds?

Effective January 2012, paper bonds have been discontinued. However, you can still purchase United States savings bonds online, via the U.S. Treasury website. All you have to do to get started is set up your account and you can go on to buy bonds.

The maximum bond amount that you can buy each year for each type of bond, for each social security number, is $10,000. You can also purchase bonds with help of a brokerage firm.

Another option is to enroll in the Payroll Savings Plan, letting employees purchase bonds in different denominations. These will then be deducted automatically from your pay check. You can combine it with your 401(k) or use it as a standalone plan. The plan will continue until you leave your place of employment or until you send legal, written notice stating that you wish to terminate it.

The Benefits of Owning United States Savings Bonds

  • US savings bonds are extremely safe investments, since they are backed in full faith by the US government. No one else can redeem them since they are registered under the buyer’s name.
  • The interest you get from savings bonds is exempt from local and state income taxes. They may also be exempt from federal income taxes, if they are utilized for university, college, or vocational school tuition fees.
  • Buying these bonds is very convenient, since you can purchase them directly from the Treasury’s website. You can enjoy flexibility, too, since you can buy as little as $25 to as much as $10,000 per year.

Examples of US Savings Bond Brokers

Many online brokerage firms will let you purchase and sell bonds (including E-TRADE, Scottrade, Fidelity, Charles Schwab, and TD Ameritrade, among others). It is important to remember that commissions for trading stock do not apply, and that the commission for the bond will vary depending on the kind you are buying.

Many of these online brokers have cut the fees for purchasing these bonds. For instance, you can buy Treasury bonds online for zero commission from Schwab, E-TRADE, and Fidelity, while TD Ameritrade charges $25 in commission. On the other hand, most brokers will charge mark-up fees instead.

It is important to do some research, and find out how much commission or mark-up a broker will charge before making a purchase.

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