Why Savings Bonds Are Your Best Inflation Protection

With many global financial markets reacting negatively to inflation, what is a good long-term investment for a beginning investor? For many investors, especially the military, savings bonds may be a surprising answer.

Did you know that savings bonds currently pay 9.62% interest? This is certainly a much better rate than most banks and credit unions will offer; and unlike stocks, cryptocurrencies, non-fungible tokens (NFTs), or the latest investment fad, savings bonds will never lose their value.

Although savings bonds are not necessarily a good short-term investment, they can be an excellent choice for those looking for a secure long-term investment for retirement, saving for the future of your children or grandparents. children, or simply a safe and secure place to invest.

What are savings bonds?

Savings bonds are issued by the US Treasury and are a low-risk, government-backed investment. Savings bonds are exempt from local and state income taxes and may be exempt from federal tax if used for education or other situations.

The Treasury currently issues two types of bonds: Series EE and Series I.

Series EE bonds are similar to savings bonds that have been around since World War II; they offer a fixed interest rate that changes every six months. Currently, EE bonds pay an annual interest rate of 0.10%; however, after 20 years, the value of the bond is guaranteed to at least double. The government will make a one-time adjustment to your investment to fulfill this guarantee.

Series I bonds, introduced in 1998, have an interest rate that tracks the consumer price index and adjusts every six months. The consumer price index measures the cost of goods and services and reflects the rate of inflation. Currently, Series I bonds pay an interest rate of 9.62%, this rate may change on October 1, depending on current inflation trends.

The Series I bonds that were purchased in 1998 have had their interest rate adjusted over the years, so they currently offer investors a rate of return of 13.18%. That’s not too shabby, especially when you look at the tax considerations and the fact that the money you invest in savings bonds, as well as the interest rate, is guaranteed by the federal government.

This interest rate rivals the Thrift Savings Plan (TSP) C Fund, which tracks the Standard & Poor’s 500 (S&P 500) index, a mix of stocks from 500 large and mid-sized US companies. While Fund C average return of 13.08% over 10 yearsthe same fund C suffered a loss in value of 16.15% in the last 12 months.

Savings bonds will never lose their value. That’s what makes it an attractive investment for long-term goals – such as college savings, retirement, or a nest egg for your kids – or when you don’t need the money right away, but want to. don’t want to lose it. neither do all of them. Investing just $25 to $50 a week in savings bonds for your children can provide them with a nice amount of money when they are starting out in life or for other expenses.

Savings bonds must be held for at least 12 months, with lower interest rates being paid on bonds less than five years old. There is a minimum investment of $25 and a maximum annual investment limit of $10,000 per person. The bonds are guaranteed to pay interest for 30 years. You can buy bonds for anyone, as long as they have a social security number.

How to buy savings bonds

You can buy savings bonds with allocations from your active duty or retirement pay; you can also buy them directly online or with your federal tax refund. You must create an account with CashDirect, the US Treasury website, before you can make purchases. Consult your payroll office or visit My salary for more information.

So if you want a potential tax-sheltered, inflation-protected investment, Series I Savings Bonds are a strategy to consider.

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