What Are Series EE Bonds?
Series EE bonds are US savings bonds that are considered very safe investments. More people invest in Series EE bonds when the economy is bad (like it is today) and the market is unpredictable. Investors with low risk tolerance prefer to put money in series EE bonds than to risk it in the volatile stock market.
The interest rate that series EE bonds pay is very low. For example, they pay 1.40% interest fixed rate in 2008. Series EE bonds that were bought in May of 2005 and afterwards will earn a fixed rate of return whereas series EE bonds bought between May of 1997 and April 30, 2005 will earn interests based on the current market rates.
Buying series EE bonds is easy. The US Treasury Department has made it possible to buy them online through a governmental website. However, you can still buy series EE bonds at your local financial institutions or banks. Many employers also offer the option of buying series EE bonds through payroll deduction programs.
Nowadays, many people take advantage of the availability of US savings series EE bonds online. When investing in series EE bonds, you can choose between electronic series EE bonds or paper series EE bonds. Paper series EE bonds start at $50 denomination whereas the smallest denomination of electronic series EE bonds is $25.
While paper series EE bonds are sold at 50% of their face value, electronic series EE bonds are sold at the full face value. That means, to buy series EE bonds online, you pay $50 for a $50 series EE bond whereas you only pay $25 for a $50 series EE bond certificate.
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 before 5 years after purchase, there is an interest penalty. The interest penalty for early redemption of series EE bonds is the most recent interest payments for 3 months. If you redeem series EE bonds after 5 years, there is no penalty.
Since series EE bonds are guaranteed by the US government, they are considered one of the safest investments around. People buy series EE bonds for many reasons, not just for investments but also for education funding as well as retirement funding. Best of all, Series EE bonds come in many different denominations and are extremely flexible for your budget.
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