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The New Rules for Buying and Giving U.S. Savings Bonds

The purchasing process has changed dramatically

By Bonnie Kirchner

Do you like to buy U.S. Savings Bonds for yourself or as gifts? Then you need to know about a big change in the way they’re now issued.


As of Jan. 1, you can no longer purchase U.S. Savings Bonds at your local bank or credit union. Not only that, you can’t buy paper versions of the bonds — with one exception. 


Here's a quick refresher course on the difference between EE and I Bonds: Both types can be bought in denominations of $25, earn interest for 30 years, are exempt from state and local taxes, and can be cashed in after 12 months (with a three-month interest penalty if you redeem them within the first five years). EE Bonds issued after May 2005 earn a fixed rate of interest; the current rate is 0.60 percent. I Bonds, which offer inflation protection, earn a combination of a fixed interest rate (it's currently 0.00 percent, however) and a rate pegged to inflation (now 1.10 percent).


Now, the new rules about U.S. Savings Bonds:


If you currently own EE and I Bonds: You already own paper bonds? Don’t fret. There's no need to convert them into electronic bonds. They’ll keep earning interest, provided they have not matured, and you’ll still be able to go to a bank or credit union to redeem them. Even if your bonds are lost or destroyed, the Treasury Department will replace them on good old paper, as long as you download the form for that.



The bonds you buy will show up in your Treasury Direct account the next business day after you make the purchase. You can calculate their current value by using the Treasury Direct online Savings Bond Calculator.



If you want to use your tax refund in the form of paper I Bonds: This is the only way left to purchase paper Savings Bonds. You’ll need to file Form 8888, Allocation of Refund (Including Bond Purchases) with your 2011 federal income tax return, so you can tell the Treasury Department that you want to use all or part of your tax refund to buy paper I Bonds. (You don’t need a Treasury Direct account to do this.) You can purchase up to $5,000 in I Bonds through the tax refund program.


Are you steamed about the end of paper Savings Bonds? Then you may want to add your name to an online petition created by paper-bond fan Marc Prosser, an effort to persuade the Treasury Department to reverse its policy. But don't get your hopes up. With the exception of tax refunds, paper bonds seem to be gone for good.

Bonnie Kirchner is a Certified Financial Planner and the founder of $ea Change Financial Education. She is the author of Who Can You Trust With Your Money? Read More
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