US Treasury EE Saving Bonds: Good Idea Or A Stinker Idea?

Buying a US Treasury EE Bond can be a great idea if you want your funds held long term and have no need for the funds before their 20-year maturity.

EE Bonds offer fixed interest rates for the life of the bond. The maturity period for EE Bonds is 20 years, and if you redeem the bond in the first five years of ownership, there is a penalty affixed.

EE Bonds offer safety, market yield, and tax-deferred interest compounding. EE Bonds are sold at a face amount in units of $100, and at maturity, the entire face amount is returned plus accrued interest.

On the negative side of owning EE Bonds is that you cannot sell EE Bonds to anyone except back to the US Treasury. EE Bonds can only be redeemed after holding ownership for 12 months. The interest offered to you at an early redemption time is very low and by far in the Government’s favor.

In addition to receiving a much lower interest rate than the original rate offered, you will also be penalized with a 3-month loss of interest. As an example, if the EE Bond was offering 3% interest and you redeemed before the 10-year maturity date, you may well earn less than 1% under current yields.

US EE Bonds also limit the amount you can buy in any calendar year, $10,000 per year per social security number.

Current interest rates are very low, 20 year EE Bonds are currently offering .10%. For additional information, the US Treasury provides this website:http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eebuy.htm



When you consider the restrictions placed on buyers of EE Bonds and the low interest provided for a 20-year commitment, it makes sense to look elsewhere for your important funds. If safety and security are key to your needs, bank accounts and fixed-rate annuities could be a better choice for a higher yield.