But THERE IS SOME FINE PRINT.
I know this is way off my usual topics, but I’m a federal regulator of financial institutions by trade, so I love money. I love making it, I love helping others succeed financially, I just love money stuff. But I’m also very conservative in terms of risk. So….
US Savings Bonds. You may purchase up to $10,000/year in savings bonds. Now, the EE bonds are paying a marginal amount, but the series I bonds pay 7.12%.
EE bonds are simply a set interest rate which changes every six months. As of now, it’s 0.10%. That’s not even worth the effort and it’s sure as hell not worth it given the redemption penalty.
I may as well go to my local credit union and stuff it in a savings account – at least there I can withdraw it next week if I want. However, they DO guarantee you’ll double your money in 20 years. Whoopee.
On the other hand, series I bonds are inflation-indexed bonds – they’re a combination of a base rate and an amount which is determined based on inflation – which is why they’re paying such a high amount right now. The bonds they’re selling now have a 0% base rate (god almighty) but the inflation portion of the interest rate is an eye popping 7.12% – so it’s paying a decent return (twice my mortgage rate and seven times the best rate I can find for a CD).
BUT this interest rate is only guaranteed through April 1, as they reset the interest rate every six months. At that time, the interest rate on the series I bonds reprices, based on inflation – so you could, conceivably, get zero return for your money at that time.
This means you should be checking the current interest rate twice a year to make sure you’re still happy with what they’re paying. However, I’m tending to think inflation is not going to abate that much by April, and we may be in for it for a while.
You cannot cash in the bonds (withdraw the money) for at least one year (except in limited circumstances – for example, if Congress declares a disaster or something), and for the first five years, there’s a three month penalty for cashing them in.
On the other hand, there’s no principal risk – you’re gonna get your money back. If something happens so the US Government is unable to repay the savings bonds… honey, you have much, muuuuuch bigger problems than not being able to get at that cash.
The other thing to consider… you can only buy them through their crappy website. It’s not the best, but I was able to start up Beloved’s account and sock $10K away for her this year in about ten minutes.
It takes a couple of days to process the deposit so if you want to invest for 2021, you need to do it THIS WEEK. Like now. That way, you have another $10K/person you can invest for 2022… if that’s something you care about.
Whether you invest or not, it’s no matter to me, but I’m just passing this along in case you’re interested. My next post will be more like my usual… nutcase animals, family misadventures, etc… but in the meantime, I send my best wishes for a safe and profitable 2022.