Many people invest in Savings Bonds because they are low risk and support the Federal Government. United States Savings Bonds are a way to invest money that is federally backed. Unfortunately the bonds are low interest bearing and often cannot be cashed in for many years without losing interest. However, United States Savings Bonds are not subject to State or Local taxes. Also, Savings Bonds are paper investments, so it can be a hassle if you lose your certificate before waiting to cash in. You will need a Certifying Officer to verify your signature to redeem your Savings Bond.
What Is a Savings Bond?
A United States Savings Bond is a common type of government bond that helps fund Federal spending. It is basically a loan from the Federal government that pays interest when redeemed at a certain point of maturity. Savings Bonds have been a safe investment since the Great Depression. It’s a way for the government to get necessary immediate funding and pay back interest several years later. The most common United States Savings Bonds are purchased at half their face value and a redeemable for full face value in 15 to 30 years. Well not as high yielding as an investment in the Stock Market, the Federally insured Savings Bond is certain to give you back more money than you originally invested. Most types of Savings Bonds have a fixed rate of interest. The interest earned is not taxable by State and Local government. The terms of a U.S. Savings Bond are non-negotiable. They can’t easily be transferred. So what do you do when you can’t find your Savings Bond once you are ready to redeem it 30 years after purchase? There are certainly records kept of U.S. Savings Bond purchases. However, you will need to have a Certifying Officer verify your purchase and, most importantly, your signature, at the time of redemption.
A Certifying Officer is authorized to verify signatures on certain certifications including United States Savings Bonds. Certifying Officers include officers and employees of depository institutions including banks. These officers must verify a person’s signature using a seal and stamp if the institution is authorized to pay U.S. Savings Bonds. A Certifying Agent is different than a Notary Republic. A Certifying Agent can also be a member of the U.S. Treasury, an officer and employee of a corporate credit union or Federal banking institution. Certifying Officers include judges and clerks in the United States Courts. They must be designated by the Commissioner or Deputy Commissioner of Fiscal Service. In order to certify the signature outside of the United States of America, an authorized Certifying Officer must be a U.S. diplomat or consular official, a manager and officer of foreign branches of U.S. depository institutions or a Notary Public or officer authorized by a United States diplomatic or consular office official to administrator oaths and authorize signatures.
History of Savings Bonds
United States Savings Bonds were first offered in 1935. President Franklin D. Roosevelt signed United States Savings Bonds into legislation to help the Federal Government combat the Great Depression. That year the United States Treasury Department issued the federally backed Series A Savings Bond. The first Series E Savings Bond was issued in 1941. Called “Defensive Bonds”, invested money was used to finance World War II. The Bond’s name was changed to “War Savings Bonds” after the United States of America officially entered the War after the Japanese attack on Pearl Harbor. All invested money in the Bonds were directed to the war effort.
Later several different types of United States Savings Bonds would be issued with various stipulations on interest and redemption. In 1980 the Series EE Bond replaced the Series E Bond. Like the Series E Bond, the Series EE Bond was sold at 50% of its face value and matured to full value in 20 years. In 1998 the Series I Savings Bond was added. This sold at face value but that was adjusted for inflation and deflation. Another type of Savings Bond, the Series HH Bond was discontinued in August 2004. This was a non-marketable 20 year bond. In order to purchase and redeem a U.S. Savings Bond, you must be a United States citizen, resident or a U.S. government employee.
Types of Savings Bonds
There are several different types of U.S. Savings Bonds. The Non-Marketable Bond can only be purchased from the United States Government and is not transferrable. These types of Savings Bonds do not fluctuate in value. A Purchase Bond has a minimum investment of $25 and cannot exceed $10,000. These bonds can only be redeemed electronically through the U.S. Treasury Department’s website which you must have an account open. An Interest Payment Savings Bond is also called a “zero coupon bond”. These Bonds’ interest does not accrue until the bond is redeemed on the maturity date. An Early Redemption Bond has a maturity date that falls between 15 and 30 years. If redeemed earlier, the date must not be before 12 months after purchase of the Bond. Also you can redeem an Early Redemption Bond within the first 5 years but you Bond’s last 3 months of interest. Finally, there is a Tax Consequence Savings Bond. As with other types of Savings Bonds, the interest is exempt from State and Local taxes. However Federal tax applies but only for the year of maturity or after 30 years when interest stops accruing anyway. This type of Bond, however may be tax exempt when redeemed if the redemption amount is used to pay for higher education.