Savings Bond Plan
Contents
Unlocking the Potential of Savings Bond Plans: A Comprehensive Guide
Savings bond plans offer employees a convenient way to invest in U.S. savings bonds through payroll deductions. Let's explore the intricacies of these workplace programs, including the types of bonds available, tax implications, and special considerations.
Understanding Savings Bond Plans
In a savings bond plan, a portion of an employee's paycheck is allocated to purchasing savings bonds until a sufficient amount is accumulated for the company to acquire a bond on behalf of the employee. These bonds may be registered to a single owner, co-owners, or a single owner with a designated beneficiary.
Types of Bonds
- Series EE Bonds: These bonds guarantee to double in value over a set period, typically 20 years, and can be purchased electronically.
- Series I Bonds: Indexed to inflation, these bonds offer investors a fixed rate of return plus protection against inflation. They can be bought in paper or electronic format.
Exploring Series EE and Series I Bonds
Series EE Bonds
Series EE bonds, introduced in 1980, promise to double in value over their initial term and can earn interest for up to 30 years. While they were once available in paper form, they are now exclusively sold electronically.
Series I Bonds
Introduced in 1998, Series I bonds provide investors with a return that keeps pace with inflation. These bonds earn a fixed rate of return plus an inflation rate calculated semi-annually based on the Consumer Price Index.
Tax Implications and Special Considerations
Interest earned on both Series EE and Series I bonds is subject to federal taxes but is exempt from state and local income taxes. Investors have the option to defer reporting interest for federal income tax purposes until the bond matures or is redeemed.