What Is US Series 1 Savings Bonds?

Paper savings bonds are no longer marketed in financial institutions as of January 1, 2012. Treasury’s goal of increasing the number of electronic transactions with citizens and businesses is being furthered by this measure.

NEWS: The new Series I savings bonds have an initial interest rate of 7.12 percent.

I bonds can be purchased at that rate until April 2022.

Savings bonds in Series I are a low-risk investment. They earn interest and are protected against inflation throughout their lives. You can get the following items:

You can buy, manage, and redeem I bonds straight from your web browser if you have a TreasuryDirect account.

What is the purpose of Series 1 savings bonds?

From the first day of the month after the issue date, an I bond earns interest on a monthly basis. Interest is compounded (added to the bond) until the bond reaches 30 years or you cash it in, whichever happens first.

  • Interest is compounded twice a year. Interest generated in the previous six months is added to the bond’s principle value every six months from the bond’s issue date, resulting in a new principal value. On the new principal, interest is earned.
  • After 12 months, you can cash the bond. If you cash the bond before it reaches the age of five years, you will forfeit the last three months of interest. Note: If you use TreasuryDirect or the Savings Bond Calculator to calculate the value of a bond that is less than five years old, the value presented includes the three-month penalty; that is, the penalty amount has already been deducted.

What is a Series 1 savings bond in the United States?

  • A series I bond is an interest-bearing, non-marketable US government savings bond.
  • Series I bonds are considered a low-risk investment because they provide a return plus inflation protection on an investor’s purchasing power.
  • Series I bonds pay a fixed interest rate for the duration of the bond’s existence, as well as a variable inflation rate that is changed every May and November.
  • The initial maturity of these bonds is 20 years, with a 10-year extension period for a total of 30 years.

Is it wise to invest in US Series I savings bonds?

Because they give a higher return that adjusts with inflation, may be delivered electronically or in paper form, and may avoid Federal taxation when used to pay for education, Series I Savings Bonds are our pick for the best U.S. savings bonds. Series I Savings Bonds are also the greatest option for education savings because they offer tax advantages and are designed to outperform inflation.

Bondholders will receive interest for up to 30 years, or until the bond is redeemed, whichever comes first. For bonds issued between May 2021 and October 2021, the current rate is 3.56 percent (as of January 2022). Interest rates are a combination of a fixed rate and a six-monthly inflation rate.

These bonds can be acquired for as little as $25 per calendar year per Social Security Number, with a maximum of $10,000 per calendar year per Social Security Number. Electronic bonds can be purchased for as little as $25 and as much as $10,000, with denominations of any value in penny increments in between. Paper bonds cost $50 each and are available in denominations of $50, $100, $200, $500, and $1,000, with a maximum annual purchase amount of $5,000. Paper savings bonds are only available with your IRS tax refund, while electronic savings bonds can be acquired at any time through Treasury Direct.

Before redeeming Series I Savings Bonds, they must be kept for at least one year. These bonds are known as zero-coupon bonds since they do not pay interest on a regular basis. When the bond is cashed, the interest accumulates and is paid out. You’ll lose the interest earned over the preceding three months if you redeem them during the first five years. There is no punishment after five years.

Interest is taxable at the federal level, although it can be deducted if it is used to pay for education. Savings bonds are exempt from state and local income taxes, but depending on your specific circumstances, you may face estate or inheritance taxes.

What is the procedure for redeeming Series 1 bonds?

  • Whether you have a local bank account and it accepts savings bonds, inquire if it will accept yours. The answer may be contingent on the length of time you’ve had an account there. If the bank will cash your check, find out if there is a monetary restriction on redemptions and what kind of identification and other documentation you’ll need.
  • Send these, along with FS Form 1522, to Treasury Retail Securities Services (download or order). The bonds are not required to be signed. You’ll need to verify your identity. The instructions are on FS Form 1522, in the “Certification” section. Our address is also included in the form.

Is it possible to lose money on I bonds?

NEWS: The new Series I savings bonds have an initial interest rate of 7.12 percent. I bonds can be purchased at that rate until April 2022.

  • Is it necessary to get my signature certified if I cash my bonds by mail using FS Form 1522?
  • Does it make sense to cash my old I bonds that were issued at a lower rate and acquire new I bonds when the interest rate on new I bonds is high?
  • How can I find out what my I bond’s current interest rate and redemption value are?
  • I observed savings bonds were being auctioned on auction sites like eBayTM, but I assumed they were non-transferable. What is the mechanism behind this?

If I cash my bonds by mail, using FSForm 1522, must I have my signature certified?

It is debatable. You can send us a copy of your driver’s license, passport, state ID, or military ID instead if the current redemption value of your bonds is $1,000 or less.

When the interest rate on new Ibonds is high, does cashing my old I bonds that were issued at a lower rate andbuying the new bonds make sense?

Notnecessarily. Your I bond’s rate fluctuates every six months, and it may be higher now than when you first bought it. A new I bond had a rate of 3.54 percent in May 2021, for example. A new I bond has a rate of 1.38 percent in November 2013. In May 2021, however, the bond issued in November 2013—which had a rate of 1.38 percent at the time—had a rate of 3.74 percent. It has a higher interest rate than the bond due in May 2021.

How canI find the current interest rate and current redemption value of my I bond?

Go to your TreasuryDirect account to order an electronic I bond. Use the Savings BondCalculator to calculate a paper I bond.

How is the interest rate of an I bond determined?

  • A fixed rate of return that does not change over the life of the I bond.
  • Variable semiannual inflation rate for all urban consumers based on changes in the Consumer Price Index (CPI-U). The rates are announced by the Bureau of the Fiscal Service every May and November. The difference between the CPI-U statistics from the preceding September and March is the semiannual inflation rate announced in May; the difference between the CPI-U figures from the preceding March and September is the inflation rate announced in November.

The interest rate on an I bond is sometimes referred to as the composite rate or the overall rate because it combines two rates.

When are earnings added to the I bond?

I bonds gain value on the first of every month, and interest is compounded semiannually based on the issuance date of eachI bond. The issuance date of an I bond is the month and year in which the bond is fully paid.

What is the difference between EE and I bonds?

The EE bonds we sell now have a set rate of interest and are guaranteed to double in value in 20 years, regardless of the rate. Today’s I bonds earn a variable rate of interest that is linked to inflation; as inflation happens, the bond’s value rises. An I bond’s value isn’t guaranteed to rise to a set level.

Are there tax benefits to using I bonds to finance education?

Yes. You may be able to totally or substantially exclude savings bond interest from federal income tax under the Education Savings Bond Program. When you pay qualified higher education expenses at an eligible institution or through a state tuition plan in the same calendar year that you redeem eligible I and EE bonds issued in January 1990 or later, this can happen. When purchasing bonds, you are not needed to state that you intend to use them for educational purposes, but you must ensure that the program’s conditions are completed; some apply when the bond is purchased (s). See IRS Publication 970, “Education Tax Benefits.”

Electronic bonds as gifts

You can buy an electronic I bond as a gift for someone and keep it in your TreasuryDirect account’s “Gift Box” until you’re ready to give it to them.

Before you can give savings bonds as gifts, you must keep them in your TreasuryDirect account for at least five working days. Treasury is protected against loss by the five-day hold, which ensures that the ACH debit has been performed satisfactorily before the cash can be moved.

You must submit the recipient’s Social Security Number if you buy an electronic I bond as a gift. To be able to transfer the bond to the gift receiver, they must first open or already have a TreasuryDirect account. A parent must open a TreasuryDirect account and link it to a Minor Linked account if the receiver is a minor. The gift bond will be delivered to the Minor Linked account. If the receiver does not have a TreasuryDirect account, you may keep an EE or Ibond that you bought as a gift until it matures.

Paper I bonds as gifts purchased with your IRS tax refund

I bonds make excellent gifts for a variety of events. A paper I bond can be mailed to you using your tax refund so that you can personally hand it to the receiver. Download a gift card when you purchase the I bond. On the I bond, the word “gift” will not display.

If you’re buying an I bond as a gift and don’t know the recipient’s Social Security number, just use your own. Despite the fact that your number will be printed on the bond, you will not be charged any taxes, and it will not go against your yearly purchase limit. The Social Security Number is only needed to trace the savings bond in the event that it is lost, stolen, or destroyed.

How do I file a claim for lost, stolen, or destroyed paper I bonds?

Write to Treasury Retail Securities Services, PO Box 214, Minneapolis, MN 55480-0214 to file a claim. You’ll have to fill out FS Form 1048. (download or order).

Before we can look for your security record, we need the following information:

  • serial number of the bond — If you don’t have the serial number for the bond, submit all of the following information, which may be on the bond(s):

Where can I bonds be redeemed?

You can redeem electronic I bonds through the TreasuryDirect program if you have them. You can cash paper I bonds at some local financial institutions or by mail if you own them.

When can I cash (redeem) an I bond if I need the money?

After 12 months, you can cash in your Series I bonds at any time. You’ll get your original purchase price plus any interest earned. I bonds are supposed to be held for a longer period of time; if you redeem one inside the first five years, you will forfeit the last three months’ interest. If you redeem an I bond after 18 months, for example, you’ll get the first 15 months of interest back.

Can EE or E bonds be exchanged for I bonds?

No, but you can sell your EE or E bonds and use the money to purchase I bonds. The interest on the EE or E bonds must be declared on your federal income tax return for the year they were cashed.

What are Gulf Coast Recovery Bonds?

From March 29, 2006, through September 30, 2007, Gulf Coast Recovery Bonds were issued. This special I bond designation was made to encourage continuing public support for hurricane recovery activities in the region. A clause in the Gulf Opportunity Zone Act of 2005 encouraged Treasury to make this designation. The proceeds from the sale of savings bonds went into the Treasury’s general fund and were spent pursuant to appropriations authorized by Congress and signed into law by the President, including those for Gulf Coast rehabilitation.

I noticed savings bonds are being sold through auction sites such as eBayTM, but I thought ownership was non-transferable. How does this work?

Savings bonds are sometimes marketed as collectibles or souvenirs. Because a savings bond is a registered security and ownership is non-transferable, the sale has no effect on the savings bond’s ownership. The owner or co-owners named on the bond still have a contractual connection with the US Treasury, not the individual who acquired the bond at auction. As a result, the person who purchases it at auction is unable to cash it; instead, he is purchasing a piece of paper displaying a bond that remains the property of the owner or co-owners specified on the bond. If the bond was lost and has since been replaced, it may be the property of the United States Treasury. Bottom line: Buying a savings bond at an auction is a bad idea because you don’t get any title or ownership rights to the bond.

Is bond investing a wise idea in 2022?

If you know interest rates are going up, buying bonds after they go up is a good idea. You buy a 2.8 percent-yielding bond to prevent the -5.2 percent loss. In 2022, the Federal Reserve is expected to raise interest rates three to four times, totaling up to 1%. The Fed, on the other hand, can have a direct impact on these bonds through bond transactions.

Is it wise to invest in bonds?

  • Treasury bonds can be an useful investment for people seeking security and a fixed rate of interest paid semiannually until the bond’s maturity date.
  • Bonds are an important part of an investing portfolio’s asset allocation since their consistent returns serve to counter the volatility of stock prices.
  • Bonds make up a bigger part of the portfolio of investors who are closer to retirement, whilst younger investors may have a lesser share.
  • Because corporate bonds are subject to default risk, they pay a greater yield than Treasury bonds, which are guaranteed if held to maturity.
  • Is it wise to invest in bonds? Investors must balance their risk tolerance against the chance of a bond defaulting, the yield on the bond, and the length of time their money will be tied up.

Do savings bonds gain value over time?

  • Governments sell savings bonds to individuals to help support federal spending while also providing a risk-free return.
  • Savings bonds are purchased at a bargain and do not pay interest on a regular basis. Instead, as they get older, their value rises until they reach their full face value.
  • The length of time it takes for a savings bond to mature is determined by the series it belongs to.

What are the disadvantages of American savings bonds?

Savings bonds have a poor rate of return, which is one of its biggest drawbacks. Higher interest rates may be available through a variety of different safe investments, such as high-yield savings accounts backed by the US government.

Apart from the potential for low returns, the inability to redeem savings bonds within a year of purchase can make them less enticing. Furthermore, if you redeem during the first five years, you’ll forfeit the interest you’ve collected over the previous three months. People frequently need to use their long-term savings to meet unforeseen bills, so these limits, combined with the low interest rates given, should make you reconsider investing in savings bonds.

EE or I bonds: which is better?

If an I bond is used to pay for eligible higher educational expenses in the same way that EE bonds are, the accompanying interest can be deducted from income, according to the Treasury Department. Interest rates and inflation rates have favored series I bonds over EE bonds since their introduction.