Investing in US Savings Bonds and Treasury Instruments - Key Points

Key Points Regarding Savings Bonds:
  1. US Savings Bonds comprise the following: EE Bonds, HH Bonds (no longer issued as of 8/31/04) and I bonds (inflation protection)
  2. EE & I bond interest may be excluded from federal income tax if used for qualified higher education (college tuition) in same year redeemed
  3. Interest earned on EE or I bonds is exempt from state & local income tax. This interest is, however, taxable for federal purposes
  4. EE bonds accrue/pay interest for 30 years, until maturity
  5. EE Bonds issued before 1993 are paying 4.16% interest
  6. Minors can purchase EE bonds
  7. No federal tax is due until maturity of US Savings Bonds, unless you elect to accrue the interest each year. This election then applies to ALL EE bonds you own
  8. EE Bonds are puchased at 50% of par value
  9. Series HH bonds pay interest semi-annually
  10. The maximum EE bond purchases you are allowed in 1 year = $10,000 par (paper EE bonds) + $10,000 par (electronic EE Bonds), for a total of $20,000 par
  11. An individual's ability to purchase EE bonds is limited if their income exceeds $104,900 (married) or $69,950 (single or head of household), $0 (married filing separately)
  12. Savings bonds are not considered "Treasuries". They represent their own separate category
 
Four Types of Treasuries:
  1. TIPS = inflation-indexed bonds issued by the Treasury. Principal is adjusted to CPI. Maturities = 5, 10 & 20 years
  2. Treasury Bonds = maturity of 20-30 years. Pays interest every 6 months
  3. Treasury Notes mature in 2-10 years. Pays interest every 6 months
  4. Treasury Bills mature in 1 year or less. Sold at discount. Maturites = 28 days, 91 days, 182 days & 364 days
STRIPS are not issued by Treasury. They are created for sale in the secondary market by investment banks and brokerage firms. Interest & principal are separated and sold in secondary market as individual debt obligations. The federal government does register STRIPS in its book-entry system. STRIPS can only be bought through a broker. They are resold in form of zero coupon bonds and pay no interst until maturity.
 
China currently holds $802 billion in US Treasuries. Japan is next with $677 billion. UK holds $164 billion
 
If China were to stop buying US Treasuries, the US economy would collapse.

Posted by TOM CORLEY RICH HABITS at 8/7/2009 9:54 AM
Categories: Personal Finance
Tags: US Savings Bonds retirement money Treasuries investments low risk investments safe investments
 

What did you think of this article?




Trackbacks
Trackback specific URL for this post
  • No trackbacks exist for this post.
Comments
  • No comments exist for this post.
Leave a comment

Submitted comments are subject to moderation before being displayed.

 Name

 Email (will not be published)

 Website

Your comment is 0 characters limited to 3000 characters.