What You Should Know About Savings Bonds and Inflation
There are a few details about I Bonds to keep in mind.
First, there is a limit on how much you can invest. You can buy up to $ 10,000 per year, per person, in Digital I Bonds through Treasury Direct, a website operated by the Bureau of the Fiscal Service, which is part of the Treasury Department. (Savings bonds can no longer be purchased at bank branches.)
You can also buy an additional $ 5,000 in Paper I Bonds each year using your income tax refund. (Buying with a tax refund is the only way to buy traditional non-electronic savings bonds.)
A couple could then buy up to $ 30,000 of I Bonds for themselves each year. To reach that total – $ 10,000 each in Electronic I Bonds, plus $ 5,000 each in Paper I Bonds purchased with an income tax refund – a couple must file separate income tax returns. If they file a joint return, which is common, the maximum is $ 25,000 because the form used to purchase paper bonds with tax refund sets a maximum purchase of savings bonds of $ 5,000 per return. .
The couple could also buy more to give someone as a gift.
Another downside: you must hold a deposit for 12 months. The government will not buy it back sooner. So be careful before you put all of your emergency fund in I Bonds, Mr Mardock said – you can’t convert them to cash for a year.
“The catch is, it’s not as liquid as a savings account,” Tumin said.
And be aware that if you cash in before holding a bond for five years, you’ll have to pay back the last three months of interest. Even so, given that bonds currently pay a higher rate than other savings options, you’ll likely get away with it even if you pay the penalty, Tumin said.
Here are some questions and answers about Series I Savings Bonds:
Is there a minimum purchase amount?
Yes. The minimum purchase is $ 25 for electronic bonds and $ 50 for paper.
To buy the bonds (unless you are using a tax refund), you will need to create a Treasury Direct account and link it to your bank account. You can buy digital bonds for any dollar amount, down to the penny, as long as they’re over $ 25.
Paper bonds, purchased at tax time, are available in denominations of $ 50, $ 100, $ 200, $ 500 and $ 1,000.
Savings bonds aren’t sold through brokers, which is one reason some people don’t know about them. There is no commission.
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