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Paper Savings Bonds Will No Longer Be Sold by Banks

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Paper Savings Bonds Will No Longer Be Sold by Banks

The Treasury just issued a press release announcing that paper savings bonds will no longer be sold at banks and credit unions starting in 2012:

The Bureau of the Public Debt announced today that as of January 1, 2012, paper savings bonds will no longer be sold at financial institutions. This action, which supports the U.S. Department of the Treasury's goal to increase the number of electronic transactions with citizens and businesses, will save American taxpayers approximately $70 million over the first five years.

But savings bonds, introduced in 1935, are not going away. Electronic savings bonds in Series EE and I will remain available through purchase in TreasuryDirect, a secure, web-based system operated by Public Debt – where investors have been purchasing savings bonds, available 24/7, since 2002.

If you already have paper savings bonds, you don't have to worry about converting them or redeeming them before 2012. At the bottom of the press release, the Treasury states: "Those currently holding paper savings bonds can continue to redeem them at financial institutions".

According to the press release, the only way to get new paper savings bonds after 2011 will be by purchasing them with your tax refund. More details about using your income tax refund to buy I Bonds are available at this TreasuryDirect FAQ page.

One thing not mentioned in the press release is what will happen to the annual purchase limit. I assume it will remain the same. Currently, the annual purchase limit for the I Bond is $5,000 at TreasuryDirect and $5,000 for paper bonds (per SSN). So without the paper option, the limit will effectively be reduced to $5,000. The only way to get around this may be to withhold more on your taxes so you will have at least $5,000 in your tax refund that you can use to purchase the paper I Bond. Of course your money won't be earning interest while you are waiting for the tax refund.

Update 7/17/11: I have some new information on the annual purchase limit and on how to buy paper bonds with your tax refund in this thread how to buy paper savings bonds after 2011.

In the last 10 years the Treasury has implemented several changes that have made savings bonds less attractive. One of the worst was cutting the annual purchase limit to one-sixth of what it had been. It used to be possible to purchase up to $30,000 of I Bonds at TreasuryDirect in one year. After this big cut, I was hoping that the Treasury would be a little more generous on how it set the I Bond fixed rate. They actually became less generous with the fixed rates. Since that purchase limit changed, the fixed rates have consistently been under 1.00%, and now it's at zero. They used to be over 3.00% back in 2000.

Even with the zero fixed rate, I Bonds can occasionally be good short-term deals when inflation spikes. I described the details of this in my review of May's I Bonds rates.

Edit 7/14/11: Changed "by one-sixth" to "to one-sixth of what it had been".



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Comments
18 Comments.
Comment #1 by bobert posted on
bobert
THANKS, KEN.  I guess I need to get some in NOV, if it makes sense,  when they announce the new rates.

3
Comment #2 by Anonymous posted on
Anonymous
Ben is already printing the money for QE3, so don’t hold your horses for better rates any time soon.

11
Comment #3 by eric2 posted on
eric2
Simple - if you want to buy paper I bonds, just make a payment of "estimated taxes" in the amount you wish to purchase, about 2 weeks before filing your tax return. Won't require you to tie up the money very long and you are allowed to pay estimated taxes up to 4/15 of the following year.

6
Comment #4 by Anonymous posted on
Anonymous
So ... our country is swimming in debt and the government proposes to make it MORE DIFFICULT to purchase the bonds necessary to pay for that debt...Awesome!

 

7
Comment #6 by lou posted on
lou
The annual limit is too low to waste my time dealing with this.

7
Comment #7 by Anonymous posted on
Anonymous
"One of the worst was cutting the annual purchase limit by one-sixth."

If it went from $30,000 to $5000, it was cut by *five-sixths*, or cut *to* one-sixth of what it had been.

3
Comment #8 by Anonymous posted on
Anonymous
With the Federal Reserve (aka Bernanke) currently buying all kinds of US Government Bonds with the resulting pitifully low interest rates, the Treasury might figure out they have no need to offer savings bonds to individuals when they can just keep printing make believe money and buying back whatever bonds they offer and put them on their so-called expanded balance sheet.  Big institutions will be encouraged but ordinary people won't be worth their trouble!!!   Ordinary people will simply suffer the effects of the devalued U.S. dollar!

3
Comment #9 by Anonymous posted on
Anonymous
With such a big deficit that keeps growing, why make it attractive to issue more debt obligations?  They need to deal with the current debt, so why keep piling it on?

2
Comment #10 by RJM posted on
RJM
Ive got paper bonds. Can I convert them to online ?

Pluses or minues to doing this if allowed ?

1
Comment #11 by Anonymous posted on
Anonymous
Number 10: You can convert the paper bonds through the Treasury Direct website. If you do not already have a Treasury Direct account, you will have to establish one. As of a few years ago, the online conversion process is quite time-consuming, especially if you have numerous paper bonds. And you had to mail the bonds and printouts to complete the conversion.

The plus side: you don't need to go to a bank to redeem bonds -- you can do it online and have the proceeds deposited in your linked bank account.

Downside: the conversion process was a pain the butt. Additionally,  once you establish a linked account for bond purchase and redemption, it is a real pain in the butt to switch to another bank.

I prefer paper bonds -- so I'm not converting any more paper bonds to electronic bonds.

 

 

3
Comment #12 by Anonymous posted on
Anonymous
What happens if one tries to buy --2011--more than $5000 of paper bonds-- say $5000 one time and the next time $1000--does the $1000 just get rejected? 

3
Comment #13 by Anonymous posted on
Anonymous
How often is the Treasury Direct website down for " Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} maintenance "?  Once a month for a few hours?  Is there anything preventing them from taking their website down for days at a time for "maintenance"? I'm concerned that TD could use this trick to restrict access to our money the way Discover Bank does. I hear the voice of my grandfather who survived the Great Depression warning me about this...

1
Comment #14 by Anonymous posted on
Anonymous
How often is the Treasury Direct website down for "maintenance"?  Once a month for a few hours?  Is there anything preventing them from taking their website down for days at a time for "maintenance"? I'm concerned that TD could use this trick to restrict access to our money the way Discover Bank does. I hear the voice of my grandfather who survived the Great Depression warning me about this...

1
Comment #15 by Kavin matthews (anonymous) posted on
Kavin matthews
Hello,

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--
Thanks & Regards,
Kavin matthews

1
Comment #16 by Anonymous posted on
Anonymous
HOw will i buy bonds and i dont like the online buying bond thing

2
Comment #17 by Anonymous posted on
Anonymous
so what happens if you want to continue to buy paper i bonds, can you go direcdtly to the federal reserve and purchasae them?

 

1
Comment #18 by Anonymous posted on
Anonymous
I am not in favor of this new plan for savings bonds. I buy them  twice a year for my 8 grandchildre now I like the series I ones. I will not be doing this starting in 2012,I like having the bonds in my hands not the goverments or the computers. Many of my senior friends feel the same as I do.alot of senior citizens buy bonds but do no use a computer & will not even try it.

1
Comment #20 by Anonymous posted on
Anonymous
I recently purchased savings bonds online and it was a disaster.  The web site is not friendly and it is difficult to use.  I do not see how an elderly person could ever use it.  I will never use the site again or purchase any savings bonds. I recently was at a Baptism and I overheard several of the grandmothers saying how disappointed they were about the new system and gave cash in the cards instead.  The women at the bank said they did the savings bonds for no charge to the government.  

1