According to a press release, the Treasury will no longer sell paper U.S. savings bonds through banks and other financial institutions as of January 1, 2012. You can still buy electronic savings bonds through TreasuryDirect.gov.
I didn’t see any news regarding the purchase limits changing. The annual purchase limit is currently $5,000 in paper bonds and $5,000 in online bonds per Social Security Number. However, with the disappearance of paper bonds this would seem to cut the overall limit in half starting in 2012. There does seem to be a small loophole in the press release:
Series I paper savings bonds remain available for purchase using part or all of one’s tax refund. For more information on this feature, visit www.irs.gov.
Does this mean I should intentionally overpay my taxes by $5,000 this year, so I can buy an extra $5k in savings bonds in 2012? If there is continued inflation and low interest rates, Series I bonds could continue to be a good deal. They currently offer 4.60% interest for 6 months, plus an yet-to-be determined amount for the next 6 months. Even if that later rate is zero, you could still earn over 2.5% annualized over the next 11 months. For more details, see the rest of my posts on savings bonds.
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At a time when the credit rating agencies are considering Junk status for the US and the congress is glibly considering default, why would you want more US debt in your portfolio? You are better off putting that $5,000 into bitcoins. At this point they have at least as good a chance at being valuable in 11 months as US debt.
I wonder if this would be a decent place to park some of the 0% APR for a year balance transfer money
@hawks5999 – Do you really believe that? I agree the politicians playing around with the debt ceiling is stupid, but I’m not worried about US debt. I want nothing to do with Bitcoins.
Maybe if large numbers of customers send e-mails to the Treasury requesting that, with the end of paper I-bond purchases at the bank, the annual limit be raised to $10k to match the previous limit using both methods, they might listen?
treasury.direct@bpd.treas.gov
When I sent mine: “I will forward your suggestion to the appropriate personnel.” Hopefully a lot of people get that suggestion forwarded…
Face it the Treasury wants to kill off the retail customers. At least they are giving until the end of the year and not one month notice like they did when they decreased the I bonds limit.
You would think the government would want MORE investors in their debt, but since this ibonds are tied to inflation, they don’t like that too much. They much rather have fixed income debt since if (when?) inflation occurs TIPS and Ibonds will not erase the debt.
I thought this was a brilliant strategy myself: http://thefinancebuff.com/backdoor-to-paper-savings-bonds.html
If you are thinking of overpaying your payroll taxes to buy savings bonds with your refund, I think it doesn’t make sense to do that. Yes, you would get the good interest rate once you buy the bonds, but until then, throughout the year, your overpayments would be earning 0 interest with the IRS, and this would significantly lower your actual return on this investment.
If the information above is correct and you want to invest in more I bonds, it MIGHT make more sense to send in an extra estimated tax payment at the very end of the tax year. In fact, I think the estimated taxes for 4th quarter can be paid in January if I remember correctly. Then if you file your tax return quickly and buy bonds with the refund, you would not lose too much time/interest.
How do you know when is a good time to encash these bonds. What is the tipping point when it makes sense to encash before the 30 year period.
According to Zero Hedge, countries outside of the U.S. dumped 74 billion dollars in U.S. Treasuries, most of it over the weekend:
“Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: “the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.” In hindsight the Occam’s Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know – in the week ended October 12, a further $17.7 billion was “removed” from the Fed’s custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. (Source)
Undoubtedly, the Chinese and other countries have recently discovered that Italy and Greece, with smaller debt to income ratios than the United States, are less riskier and carry a higher rate of return. This is because, unlike the US, the Rothschild/Rockefeller bond rating agencies have trashed their country’s debt ratings, forcing them to pay a much higher interest rate than U.S. Treasuries. Hey, if you take the risk, you might as well earn the reward!
The new US Treasury “decree” which forces American citizens to buy all their I and EE bonds electronically from the disasterously managed UST bureaucratic monopoly in Parkersburg, WV illegally discriminates against low income citizens and senior citizens who cannot afford a computer and/or may be unable to use one.
The Treasury site is also one of the worst-designed operations that any sadistic nerd could dream up in two lifetimes. And forget about contacting a human at Treasury to help you when the computer system there malfunctions (which is constant).
The claim by Treasury that the new system will save miliions of dollars is a joke. After they establish their monopoly, the Treasury bureaucrats will immediately request more money for staff and new equipment to handle their “expanded responsibilites”.
I am very disgusted that the Govt. is ending sales of paper US Series E bonds. I buy these bonds for my grandchildren, as do many seniors, and they like to give a paper bond. Also many seniors do not use the internet. Another bad decision by this Government.
Treasury will eventually eliminate paper savings bonds BUT they still have to issue them right now – they have just deviously hidden the mechanism for buying them. If you read their press release carefully, they did NOT eliminate paper I-Bonds as of January 1, 2012 – they DID eliminate their sales by financial institutions.
If you go onto the TreasuryDirect site and go to the form used to buy paper Series EE bonds you will find that you can also order paper I-Bonds on the same form. The only thing that changes is that you send in the order form to Treasury instead of your bank doing that on your behalf.
Please check it out and see if I’m mis-reading anything because I plan to use that process in order to maintain the $20,000 annual purchases as long as I’m able to do so.
Bill, wow, what a find. I wonder if this page will go away after January 1st? If it doesn’t, that would be great!
https://www.savingsbondsdirect.gov/otc/bondOrder.html
@Bill in KY – Very interesting… I do see that they are only ending “over the counter” sales of paper savings bonds. This may be much more simple than the IRS refund route.
@Dan – Thanks for the direct link. It appears to simply be a form that we print out and send into a Federal Reserve Bank with a check. Looks the exact same as the form I fill out right now to buy paper savings bonds at the bank.
Unfortunately it appears that bogleheads.org poster Nisiprius called someone at Public Debt about this specific issue and was told that the online form will be taken down.
http://www.bogleheads.org/forum/viewtopic.php?t=85427&mrr=1320774024
Better be prepared to make overpayments to the IRS if you want paper savings bonds after 2011. 🙁
Sometimes I feel like we need some sort of public shaming for the quiet dismantlement of the savings bond system. Even if they really wanted to save money on paper, why not just increase the electronic purchase limit to compensate.
gov says americans should save more, then makes it harder to buy bonds..nothing more than restricting access for smaller investors…out of control gov run by millionaires that the people elect…im tired of the scamming and squeezing…maybe Andrew Jackson was right on some things…
I’m sorry that I can”t buy paper bonds for my Grand children any more. All eleven of then look forward to getting them in the mail. I also thought it help back our country. It’s too bad for the average person that it was taken away. I think its another way goverment is becoming more out of touch and its not by the people for the people anymore.
Guys, I too have a serious, serious issue with this. I read all the comments. I am only 36. I started investing while in the army in 05. then after the army while working w/the gov’t my payroll office stopped doing it(I guess beginning 2010). Now I find this. I can’t even setup an online acct without my checking acct number, routing number, and my social security number. I also can’t click on the link which seemed to allow paperbonds. Is it impossible to get EE and/or I United States Bonds without doing the tax thing? I would really like to be able to mail a check with the application. I buy for my wife, all my children, myself, and I am always the co-owner or owner. LOL. please is the only way the tax way? I see that being taken away sometime too maybe. Also, the EE bonds seem to be face value purchases now. I too think the site is not user friendly. I am not opening an acct at this point. THE BIGGEST TRAGEDY WAS WE HAD A FAMILY EMERGENCY AND i CASHED 30SOMETHING BONDS JAN 2012 NOT KNOWING ANY OF THIS. i HAVE ONE PAPER BOND LEFT FOR MY ONE YR OLD SINCE IT WASN’T 12MTHS OLD. I AM UPSET ABOUT THIS. WHAT A LUDICROUS DECISION IN ALL HONESTY
ludicrous as in the gov’t decision but I wish I could take back what I did(even though the money was needed). 1st investment I have cashed early in my life…somehow I maintain the others(saving boatloads for retirement even though my wife lets me hear it), paying consistently extra to the mortgage, etc.
I remember how upsetting it was in 2010 But after 15minutes of reading I was relieved when the US Treasury website said something to the affect of (paraphrase): don’t worry though, we know how important savings bonds in paper are and this will not be taken away”. I can’t even get a paperbond and a box of cigars for my child’s birth anymore. this needs to be changed