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US savings bonds are going paperless

February 13, 2012
By JOHN PEPIN - Journal Staff Writer ( , The Mining Journal

MARQUETTE - Looking to purchase a savings bond? Don't look to your nearest financial institution.

Under new rules, which took effect Jan. 1, those hoping to purchase savings bonds need to visit an online website, instead of their credit union, bank or savings and loan.

"They kind of get frustrated." said Ron Lauren, chief executive officer of the Superior Iron Range Community Federal Credit Union in Negaunee, referring to savings bond customers who have traditionally purchased the bonds at local financial institutions. "They think it's our fault. This is all government controlled."

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Last July, the U.S. Bureau of the Public Debt announced that as of Jan. 1, paper savings bonds would no longer be sold at financial institutions. The action supports the U.S. Department of the Treasury's goal to increase the number of electronic transactions with citizens and businesses, aimed at saving American taxpayers about $70 million over the first five years.

But the bureau said savings bonds, introduced in 1935, are not going away. Electronic savings bonds in Series EE and I remain available through purchase at TreasuryDirect, a secure, web-based system operated by Public Debt. Investors have been purchasing savings bonds at the site since 2002.

"Savings bonds are very much a part of this country's history and culture, and will remain a part of America's future - but in electronic form," said Public Debt Commissioner Van Zeck. "It's time for us to take a 1935 model and make it a 21st century investment tool."

Financial institutions can still cash savings bonds, the new rule only applies to purchasing bonds.

In a press release, the bureau said ending over-the-counter sales of paper savings bonds at financial institutions is a continuation of the U.S. Treasury Department's all-electronic initiative announced in April 2010. As part of the initiative, the treasury department stopped the sale of paper bonds through traditional payroll plans, effective December 31, 2010.

It is estimated that ending the sales of paper payroll and new issues of over-the-counter bonds will save a total of $120 million over the next five years in areas such as printing, mailing, storing bond stock and fees paid to financial institutions for processing bond applications.

"Through TreasuryDirect, investors have an easy and convenient way to purchase and manage their bonds free of charge," Zeck said. "Investors will no longer have to worry about misplacing, losing or storing paper savings bonds."

The U.S. Securities and Exchange Commission said savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government's borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

The bonds which can be purchased online at TreasuryDirect include:

- Series EE U.S. Savings Bonds are an appreciation-type (or accrual-type) savings security. They are sold at face value, so you'll pay $50 for a $50 bond. The bond is worth its full value upon redemption. The interest is issued electronically to your designated account. You cannot buy more than $5,000 (face value) during any calendar year. If you redeem the bonds in the first five years of buying them, you'll forfeit interest payments for the three most recent months. After five years, you won't be penalized for redemptions.

- Series I U.S. Savings Bonds are inflation-indexed. They are sold at face value and you can buy up to $5,000 (face value) in any calendar year. Series I Bonds offer a fixed rate of interest, adjusted for inflation. As with Series EE Bonds, if you redeem Series I Bonds in the first five years, you'll forfeit the three most recent months' interest. After five years, you won't be penalized for redemptions.

The commission cited several key advantages of savings bonds including:

- Popularity as gifts. Savings bonds are a popular birthday and graduation gift and also can be used toward financing education, supplemental retirement income, and other special events. Unlike other securities, minors may hold U.S. savings bonds in their own name.

- Tax advantages. You pay no state or local taxes on the interest on the bonds, and you can defer paying federal taxes on the interest until you cash in the bond or until it matures. In addition, tax benefits are available for eligible taxpayers when Series EE and Series I savings bonds are used for qualified education expenses.

You can buy these electronic savings bonds in penny increments, from $25 up to $5,000 each year. (In paper form, these bonds were only available in specific denominations.) For more information the switch to all-electronic savings bonds and on how to open a TreasuryDirect account, visit: You can use its Savings Bond Calculator and compare the different types of securities issued by the treasury department.

Lauren said the move away from paper savings bonds is part of similar things to come. He said Social Security checks will be direct deposited by mandate in May 2013. He echoed some of the government officials in saying that an advantage to electronic bonds is not having to worry about replacing them, like paper bonds, in case of a fire or other destructive incident.

"It's change, people don't like change," Lauren said, referring to the exclusive online sale of bonds. "But it's going in the right direction."

John Pepin can be reached at 906-228-2500, ext. 206.



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