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WHEN I WAS GROWING up, I’d receive Series E savings bonds as birthday gifts from my parents. It was the start of many to come. My parents had great respect for savings bonds and, as I got older, I came to hold them in high regard as well.
Savings bonds never offered the highest interest rate. At a defense plant where I worked, a guy in the accounting department questioned my bond buying. He noted that savings bonds paid less interest than the certificates of deposit then available. I just shrugged my shoulders.
I know why I kept buying the bonds. They were something I was familiar with since childhood, plus it was an easy way to invest. When I began working full-time, I purchased savings bonds through payroll deduction. The deductions were automatic, so the money was gone before I could spend it.
In 1976, when I got married for the first time, the guests—who were our college friends—all gave us savings bonds. When I signed up for the U.S. Coast Guard’s Officer Candidate School in 1978, we were able to buy bonds through payroll deduction. I did.
When my current wife and I got married in 1987, once again our friends gave us savings bonds. And I continued buying them through payroll deduction for many more years. That ended when my employer introduced a 401(k) savings plan, and I switched my payroll deductions to buying mutual funds through the 401(k) instead.
But I held onto the savings bonds I’d acquired. They continued to earn interest for 30 years, and I typically only cashed them in when they matured.
On top of that, my mother kept buying savings bonds for my brother and me, as well as for her grandkids and great-grandkids. When my mother gave me all of my bonds, I stored them in a safe-deposit box at the bank until they matured.
In 2004, I converted some of my Series E bonds to HH bonds. These had a maturity of only 20 years, but—if you converted—it postponed the tax bill on matured Series E bonds for those two decades. HH bonds paid 1.5% in annual interest for 20 years. Coming into 2024, I still owned those HH bonds, which all finally mature this year.
When Series I bonds were introduced, I was hesitant. I was used to earning a fixed rate on my savings bonds. I bonds were different, offering a fixed rate and a variable rate. The variable rate reflects inflation, while the fixed rate represents the gain over and above inflation. I purchased Series I bonds rather than EE bonds when the fixed rate on I bonds was at least 1%.
My love affair with savings bonds has mostly come to a close. Buying a financial instrument with a 30-year maturity seems silly at my age.
Still, I continue to own many savings bonds. I hold them as dry powder should I ever need money. They’ve never been the vehicle that more sophisticated investors use. Yet, when banks were paying close to 0% interest after 2008’s Great Financial Crisis, my Series E bonds were still paying 4%. It made me feel good that this stodgy relic from the past was outshining other savings options.
Your affection is stimulated by holding these precious pieces of paper, and giving the same to others. Not any more, sorry, you have to purchase online and recipient must than have an account with Treasury dept in a weird account setup to redeem them. Takes away the good feeling of touching the paper bonds.
A significant point missed: savings bond interest is not taxed in most states where all CD, credit union interest, among others is.
Based on a handwritten list in my dad’s handwriting, I estimate the Fed owes me around $1k for savings bonds one of my great grandfathers bought for me over 50 years ago, but I’ll never see the money. He never learned to write and my name was spelled multiple ways, my SS number was probably not registered, and we don’t have the bonds. Not as bad as losing a USB key with early bitcoin.
As a child (late 1950’s – early 1960’s)
I remember buying US Saving Stamps. Which I pasted into a booklet. When the Booklet was full I was able to trade it for a $25 savings bond.
I’m still a fan of I-bonds. I wish I held more from 2000, the birth year of our final child. They had an eye-popping rate through our recent inflation bout.
In my opinion, you only need to hold them 5 years… as a port in a storm.. or a short-term goal. You’re young enough David to see that timeline.
I recently dipped my toe into the T-bill pool– that can be a short-term option, too, for the inpatient.
I can relate to your story, David. My husband and I began buying savings bonds when we married in 1973. I plan to re-register the ones that we replaced them with in my name and POD or as co-owners with my children and also convert them to electronic. The EE bonds my mother in law purchased in 1993 which were POD to me, my husband and children were held until maturity and gave us a nice reminder of her generosity.
Dave, HH bonds issued prior to January 1, 2003 had an original fixed interest rate of 4 percent per year, after which time the rate dropped to 1.5 without notice. Life’s timing isn’t perfect. I had just converted a considerable number of EEs to HH bonds.
it wasn’t worth my time and effort. I waited until it was expedient for me to cash them in and then did just that. I call them stinker bonds.
All HH bonds that are still earning interest are in their last ten years.
Your article was interesting.