September 5, 2007: Visiting an old friend, US Savings Bonds

Rarely discussed amongst the financial gurus in the world of blogs are savings bonds. I admit to owning a few hundred thousand dollars of EE and I US Savings Bonds as a safe haven not to be touched. I have owned US Savings Bonds since 1972. I bought my last bond in 2003, having enough in case everything else went bad. I have cashed in those that have totally matured.

I do not advocate these bonds for everyone. However, I believe that everyone should consider I-Bonds and determine whether they will fit into their balanced portfolio.


Indexed for inflation, I-Bonds are not nearly the decent deal they were several years ago. The US Treasury figured that out and sliced yield and terms to make them barely attractive. But somewhat attractive, still.

That said, here are a few reasons to own I Bonds:

From 1998 to 2005, I Bonds returned a higher overall return that the Vanguard 500 Index Fund. Of course, this is selective data. A guaranteed investment by the US Treasury.

No risk of capital loss.

Tax advantages (no State or local taxes and Federal tax deferred).

Low limits to purchase (as little as $50.00)

Thirty years maturity (customary at this writing).

Portable.

No load or other costs.

Non-callable.

A good anchor in a diversified portfolio.

Inflation adjusted.

With Savings Bonds, you pay tax only on the interest you've earned. With traditional retirement accounts you pay tax on your total withdrawal.

I Bonds can be purchased on line and kept in a secure account.


Good web sites for US Saving Bond information are:
www.Savings-Bond-Advisor.com or
www.savingsbonds.gov (the US Treasury web page)

You can download a Savings Bond Wizard from the government site that will track each of your bonds to determine its characteristics and total value to date, updated each month (no charge).

Boring, bland, vanilla I Bonds may be something you can use.