How Safe Are Series EE Bonds

A bad economy spurs more people to invest in series EE bonds. Series EE bonds are US savings bonds that are sold to individual investors in small denominations. Investors seeking safe investments often consider investing in series EE bonds, since they are free from risk of default.

Like most bonds, series EE bonds pay interests. However, the interest rate of series EE bonds are very low compared to other fixed income investments. An example of what the interest rate on series EE bonds is 1.4% fixed rate paid in 2008. Fixed interest rates apply for series EE bonds purchased in May 2005 and after. Before that, series EE bonds paid interests based on current market rates.

There are many ways to buy series EE bonds. The Treasury Department has made it easy for small investors to invest in them online. Most people buy series EE bonds at local financial institutions or through payroll deductions. However, not all employers offer the option of investing in series EE bonds.

The smallest amount of money you need to invest in series EE bonds at a time is $25. If you buy paper series EE bonds, your $25 will buy a $50 series EE bond. However, if you buy electronic series EE bonds, your $25 will only buy a $25 series EE bond.

Some people are confused how much they are paying for series EE bonds. Paper series EE bonds are sold at discount, half price to be exact. Electronic series EE bonds, however, are sold at face value. That means, to buy a $50 series EE bond, you pay $50 if you buy online or pay only $25 if you buy paper series EE bonds.

Bonds are often long term investments. Series EE bonds must be held for at least a year before cashing out. The interest on series EE bonds accumulate for 30 years. The longer you hold series EE bonds, the more interests and value at redemption.

If you redeem series EE bonds early, there is a penalty. Most people hold series EE bonds for at least five years because if you redeem series EE bonds before 5 years then you will not receive the latest three interest payments. If you wait until the five year holding period is up, you will not incur penalties when redeeming series EE bonds.

Series EE bonds are great, solid, and safe investments that many investors hold in their portfolios. Their interest payments are fully guaranteed by the US government. Series EE bonds can be used for many purposes such as for education funding and retirement funding.