Series I Bonds offer a low cost, incremental, and low risk investment for your portfolio. I Bonds also protect your money against inflation, as their yield has both a fixed rate as well as a variable rate that changes every six months according to inflation and deflation.
I Bonds were once only available in paper form, but now the Government offers a buying and redemption process that takes place almost entirely online. In fact, the Government plans on making the purchasing of bonds only available electronically in the future. Below, I will discuss the ins and outs of purchasing these bonds.
I Bonds Current Rates
Update: See the most current I-Bonds Rates.
The current rate for I Bonds is 1.74%, and this will not be changed again until November 1, 2010. The fixed rate is 1.54%, and the variable rate is 0.20%.
Series I Bond Purchase Limits
A minimum of $25 is needed to purchase I-Bonds electronically, and a minimum of $50 is needed to purchase paper bonds. Each year, you are allowed to purchase up to $5,000 in Series I Bonds/Series EE Bonds electronically, as well as $5,000 paper issued bonds. That means you can purchase up to $10,000 in bonds annually.
Who Can Purchase I Bonds
The following are requirements for being able to purchase bonds: you must have a social security number, be a citizen of the United States, civilian employee working anywhere, or be a citizen living abroad. Minors can also purchase I Bonds.
Where to Buy I Bonds
Update: You can no longer buy paper savings bonds unless you are using a tax refund.
You can purchase paper I Bonds in most financial institutions, including banks and credit unions. You can also buy Series I savings bonds online, a process that will streamline your purchasing experience for free. There are also many perks to purchasing bonds online, such as the ability to purchase your bonds 24/7, scheduling recurring investments for up to five years, have your details (such as purchase date and maturity date) automatically tracked for you, and online redemption.
The first step to purchasing bonds online is to open a TreasuryDirect account. You will need to have your social security number, the bank routing number and account number, driver’s license, and an email address. Once you fill out the application, an access card will be mailed to you to ensure you are the true holder of the account. You will need this card to access your account. Once in, you can purchase bonds online, and they will credit to your account within one business day.
The Treasury is eliminating the paper payroll savings bond program where employees used to be able to automatically purchase paper I Bonds through their employees in order to save the cost of running the Savings Bond program. As of September 30, 2010, federal employees will no longer have this option, and this option will be eliminated for all non-federal employees on January 1, 2010. However, automatically purchasing electronic I Bonds is available by having an account with TreasuryDirect.
Once you open your account and receive your access card, go to the ManageDirect – View My Funding Options tab for instructions on submitting a request to your employer for a payroll deduction. Just like a normal payroll deduction, the deducted money from your paycheck will be sent to your TreasuryDirect account, and will go into a Certificate of Indebtedness (C of I). The C of I is simply a non-interest bearing security to hold your money before you purchase your bonds. Once you accumulate enough money ($25 is the lowest denomination to purchase a bond electronically; $50 is needed for paper bonds), then you can purchase them through your account. Don’t forget, you can set up recurring purchases so that this process is done automatically.
You can also purchase I Bonds directly with money you receive as a tax return. Check out this article for more information on how to purchase I Bonds using your tax return.
How to Exchange Paper Bonds for Electronic
If you would like to open a TreasuryDirect account to purchase future bonds with, but still have some paper bonds, you can convert the paper bonds into electronic bonds using SmartExchange.
What to Do if Your Paper I-Bonds are Lost/Stolen/Destroyed
If your paper I Bonds are lost, stolen, or otherwise destroyed, you can get replacement ones by filling out Form 1048 and submitting it to the following address:
Bureau of the Public Debt
PO Box 7012 Parkesburg
West Virginia, 26106-7012
Next in the series on I bonds, we’ll discuss online redemption.