Savings Bonds: About — TreasuryDirect (2024)

FAQs

What are the disadvantages of TreasuryDirect? ›

Securities purchased through TreasuryDirect cannot be sold in the secondary market before they mature. This lack of liquidity could be a disadvantage for investors who may need to access their investment capital before the securities' maturity.

Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

Key Points. Pros: I bonds come with a high interest rate during inflationary periods, they're low-risk, and they help protect against inflation. Cons: Rates are variable, there's a lockup period and early withdrawal penalty, and there's a limit to how much you can invest.

About TreasuryDirect.gov

Your investments are backed by the full faith and credit of the United States government.

There are several ways to buy Treasuries. For many people, TreasuryDirect is a good option; however, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange-traded funds (ETFs).

Assuming an annual return rate of 7%, investing $50,000 for 20 years can lead to a substantial increase in wealth. If you invest the money in a diversified portfolio of stocks, bonds, and other securities, you could potentially earn a return of $159,411.11 after 20 years.

After 20 years, the Patriot Bond is guaranteed to be worth at least face value. So a $50 Patriot Bond, which was bought for $25, will be worth at least $50 after 20 years. It can continue to accrue interest for as many as 10 more years after that.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account. This substantial amount is due to savings accounts' relatively low return rate.

Bonds are typically longer, higher-risk investments that deliver greater returns and a predictable income. Bonds are also more liquid than CDs because you can buy or sell them on the secondary market—although some bonds may be harder to sell than others.

Should I cash in EE bonds now? ›

How long should I wait to cash in a savings bond? It's a good idea to hang on to your bond for as long as possible, ideally until it matures, so you can take full advantage of compound and accrued interest.

Savings bonds typically earn a lower rate of return than higher-risk investments such as stocks, but they're generally a safe investment. Minors can hold savings bonds in their own names, making them a tried-and-true way for grandparents to introduce grandkids to the concept of investing.

TIPS offer greater liquidity and the higher yearly limit allows you to stash far more cash in TIPS than I-bonds. If you're saving for education, I-bonds may be the way to go.

While I bonds can offer better protection in inflationary times, EE bonds offer stability even in volatile market conditions.

If inflation goes down, you should expect to see the composite rate for I bonds go down too. But even in periods of deflation, the redemption value of your bonds won't decline.

But while they are lauded for their security and reliability, potential drawbacks such as interest rate risk, low returns and inflation risk must be carefully considered. If you're interested in investing in Treasury bonds or have other questions about your portfolio, consider speaking with a financial advisor.

Bonds in TreasuryDirect are safely maintained in your account with the U.S. Treasury. mature or you redeem them, whichever is first. Also, if all conditions are met, using savings bonds to pay for some education expenses offers additional federal tax benefits. Affordable - Save with as little as $25.

T-bills pay a fixed rate of interest, which can provide a stable income. However, if interest rates rise, existing T-bills fall out of favor since their return is less than the market. T-bills have interest rate risk, which means there is a risk that existing bondholders might lose out on higher rates in the future.

Historically, bonds have provided lower long-term returns than stocks. Bond prices fall when interest rates go up. Long-term bonds, especially, suffer from price fluctuations as interest rates rise and fall.