Choosing Series EE Bonds

A bad economy spurs more people to invest in series EE bonds. Series EE bonds are US savings bonds that are sold to individual investors in small denominations. Investors seeking safe investments often consider investing in series EE bonds, since they are free from risk of default.

The interest rate that series EE bonds pay is very low. For example, they pay 1.40% interest fixed rate in 2008. Series EE bonds that were bought in May of 2005 and afterwards will earn a fixed rate of return whereas series EE bonds bought between May of 1997 and April 30, 2005 will earn interests based on the current market rates.

Not only you can buy paper series EE bonds the traditional way, you can now buy electronic series EE bonds. You can buy series EE bonds online or at financial institutions or banks. Many companies also offer employees the ability to buy series EE bonds through payroll deduction.

Nowadays, many people take advantage of the availability of US savings series EE bonds online. When investing in series EE bonds, you can choose between electronic series EE bonds or paper series EE bonds. Paper series EE bonds start at $50 denomination whereas the smallest denomination of electronic series EE bonds is $25.

The pricing of series EE bonds differs when buying paper series EE bonds or electronic series EE bonds. Paper series EE bonds are sold at discount. You only pay 50% of the face value of the series EE bonds you buy if you don’t buy electronically. For electronic series EE bonds, you pay full price.

Series EE bonds, like other bonds, should be held long term. The shortest time you must hold series EE bonds is one year. After that you can redeem them. Interests on series EE bonds, however, accumulate for 30 years but early redemption is possible.

There is a penalty to redeeming series EE bonds early. The penalty is that you forfeit the latest three months of interest payments if you redeem series EE bonds within the first five years. After five years, you will not pay any penalties.

Although the interest payments on series EE bonds are low, investors still like to invest in series EE bonds because of the safety and ease of investing. The small face values make it possible for new investors to invest a little at a time. But most importantly, becuase of their high level of safety, people purchase series EE bonds for education savings as well as retirement planning.