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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Treasury Direct Doubles Online Savings Bond Purchase Limits


Treasury Direct Doubles Online Savings Bond Purchase Limits

I'm happy to report some good news for a change. The Treasury just published this press release announcing an increase of the annual purchase limit for online savings bonds. Here's an excerpt:

The annual purchase limit for online United States Savings Bonds is $10,000 per series, effective January 4, 2012, the Department of the Treasury announced today. The new limit applies to Series EE and Series I savings bonds purchased through TreasuryDirect at www.treasurydirect.gov. Under the new rules, an individual can buy a maximum of $10,000 worth of electronic savings bonds of each series in a single calendar year, or a total of $20,000.

Since 2008, investors could buy a maximum of $5,000 in each series and in each form (paper or electronic). So a single owner could buy $20,000 in one year. As of January 1, 2012, paper bonds are no longer being sold through financial institutions. With today's announcement, the total amount an individual can purchase in online savings bonds in one calendar year is $20,000. An investor still can purchase up to $5,000 annually in Series I paper savings bonds using his/her tax refund and IRS Form 8888.

I'm glad to see this new higher limit. The press released failed to mention that before 2008, the annual purchase limit was six times the current level.

As mentioned in the press release, you can still buy paper I Bonds using your income tax refund. This effectively increases your annual I Bond limit to $15,000. I have more information on buying paper savings bonds with your tax refund in this forum thread.

Due to recent inflation numbers, the I Bond is a good deal relative to current CD rates. Please refer to my November I Bond review for more details.

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Frugal Frugalson
Frugal Frugalson   |     |   Comment #1
A surprisingly positive announcement considering how hard the Treasury has been working to destroy the savings bond program.
scottj   |     |   Comment #2
Have thought about buying I bonds in the past but don't know much about Bonds in general. Now with this higher rate decided to look more into it. I am very conservative and figure I should start, also saw that I could redeem tax free for education and do have a daughter going to college in 5 years. Also have been meaning to convert the couple paper bonds I have so I just opened an account at Treasury Direct. Figure now I should buy $10k I Bond but wondering if there are any downside of doing so? Thanks an advance, Scott
Anonymous   |     |   Comment #3
I think the main negative for savings bonds is that you cannot redeem them within 1 year of purchase.  If you needed the money very quickly for some emergency such as an impromptu home purchase down payment, you would be out of luck.  I don't believe they allow you to withdraw unlike CDs which only charge you a penalty.
KenBDG   |     |   Comment #4
Some have security concerns related to theft and fraud since Treasury Direct doesn't provide the same theft liability guarantees as banks. But as this My Money Blog post described, if you're careful, the risk of theft is very minimal.
scottj   |     |   Comment #5
Thanks, this is money I wont be needing until way down the road(20 years) so no problem there. Read that blog and will take steps to minimize any chance of theft
scottj   |     |   Comment #6
Went ahead and bought, thanks to this site for teaching me about how to do. One question I have and read the other thread on bonds and saw it asked but no answer, when does interest post on I Bonds?
Frugal Frugalson
Frugal Frugalson   |     |   Comment #7
Scott, savings bond interest posts the first day of each month.
RJM   |     |   Comment #8
I own anumber of paper bonds from years ago when I bought them with a rewards card.  Both the regular and the i's.


Should I continue to hold them given that I dont have any immediate need for the $ ?
melman   |     |   Comment #9
For I-bonds issued before Nov. 2001, the fixed-rate was 2% or greater, and the current yield is 5% or more.  Bonds bought today, yield 3.06% but there is no underlying fixed rate, the yield is totally dependent on the CPI.

No one here can tell you what to do.

scottj   |     |   Comment #10
Does not really seem like much  of a gamble, from reading the other I Bond thread  it looks like worst case is I could redeem in one year at  1.41%, Took the money from a savings account paying 1.25% . Also since starting in 4 years I will be paying for college I could take advantage of taking the money out tax free. Have not sent in my 4th quarter estimated taxes yet and thinking maybe I should add enough to get a refund over $5k so I can buy some more?
Grace   |     |   Comment #11
I purchased a $5000.00 I bond electronically on 8/22/11/.

As of 1/4/12 my account shows an accrual of $38.00.

According to my math, six months of interest at 4.6%

should come to $115.00. Am I doing the math wrong?





CuriousDave   |     |   Comment #12
Scottj-#2: the main drawbacks are as follows:

(1) You lose 3 months of interest if you hold the bonds for less than 5 years.

(2) You cannot redeem them at all for the first 12 months (exception for a deceased estate).

(3) You cannot transfer the bonds to anyone else while you are alive (including sale or gift), and the bonds cannot be pledged as security or used as collateral for a loan. However, when you purchase them you can name one or more beneficiaries that would become the owner(s) upon your death.

(4) Because of the way the interest rate is structured, it is impossible to compute what the bond will be worth until the last 6 months you hold them. The interest rate is a composite that consists of two parts: (a) a fixed rate, that carries for the entire life of the bond. The fixed portion is currently zero and will probably remain zero until the current extremely low interest rate environment changes, so you are basically stuck with a zero fixed component; (b) a variable rate that changes every 6 months (May 1 and November 1), based on recent inflation (that rate has had wild swings in the last few years and was even below zero for a short while - so, even though the current composite rate is 3.06% (actually, about 1.53% for your first 6 months if you buy before November 1, 2012), you could potentially earn no interest at all for some 6-month periods). You can look up the historical and current rates on the treasurydirect website. Because of all this, it would be impossible to estimate now what the bonds will be worth at the time you expect to cash them out.

Hope that helps....





Anonymous   |     |   Comment #13
Grace, the $38 includes the 3 month penalty.  This shows the amount the bond can be redeemed for. 
Anonymous   |     |   Comment #14
I bought bonds in the "good ole days" when spouse had a job and we didn't need to survive on our interest checks.  As I recall, bonds are not an "income" instrument.  I don't think one can request a monthly interest check mailed to them.  I could be wrong but I always thought they were for "buy and hold" etc.  Can be a good deal for the younger folks who want to invest for future, imo. 
Anonymous   |     |   Comment #15
can anybody tell me how to see the interest accrued on an i-bond? i can't seem to find the right items to select on the treasury direct website. i see the purchase amount but no accrued interest. it's been a little under 3 months since i purchased the i-bond. thanks.

Anonymous   |     |   Comment #16
never mind. i'm anonymous #15. i'm thinking maybe no interest posted yet because it's been less than 3 months (re the 3-month penalty).  i'll check after 4 months or later.
RIFSLAW   |     |   Comment #17
Turns out this post might not be completely accurate. Let me explain: You would think, based on the press release and treasurydirect's website, that if a husband and wife filing jointly had a refund over $10,000 they should each be able to buy $5,000 paper i-bonds with their refund, but according to the instructions on form 8888, and according to the tax specialist and "form 8888" specialist I spoke with at the IRS, you cannot. You are (jointly) limited to purchasing up to $5,000 in paper i-bonds with form 8888, and you cannot each file a form 8888 to circumvent the issue. It is a shame since I overwithheld expressly to allow us to each purchase a $5,000 paper i-bond with our refund, and now we cannot.
Les   |     |   Comment #18
I'd like to know why there is a limit on I Bond purchases?
EnronLoveChunk   |     |   Comment #19
Les this is from treasurydirect website.

Why is there a purchase limit on savings bonds?

The purpose of the savings bonds program is to provide individuals with a way to save or invest relatively small amounts of money in non-marketable Treasury securities. Individuals with saving or investment needs in excess of the savings bond purchase limit who desire the safety and stability of Treasury securities may purchase marketable Treasury securities (bills, notes, bonds and inflation-protected TIPS), which are currently available through TreasuryDirect (and from securities dealers and brokers) in $100 increments. Because there are significant differences in the ways non-marketable and marketable securities earn interest, are purchased and redeemed, etc., savers and investors should carefully compare the terms of the securities, and their personal investment needs, prior to purchase.