At a time when the nation’s savings rate is abysmal, the Treasury Department’s Bureau of the Public Debt has decided to lower the annual amount of U.S. savings bonds that an individual can purchase in paper and electronic form.
Beginning in January, the limitation on purchases of savings bonds will be set at $5,000 — meaning that individuals can only purchase $5,000 worth of Series EE bonds and another $5,000 for Series I savings bonds.
For those who want to exceed the limit for each series, there is a way. The $5,000 limit applies separately to bonds issued in paper and electronic form. You could buy $5,000 worth of EE bonds in paper form and another $5,000 in electronic form from . The same purchasing limits apply for I bonds. In total, you can purchase $20,000 worth of EE and I bonds.
The limit is now $30,000 per series (for a total of $120,000 a year for EE and I bonds) and has been that way since 2003.
If you currently have money taken out of your paycheck to buy savings bonds and it exceeds this annual limit per series, you will have to change the withdrawal.
Why the change? “To refocus the savings bond program on its original purpose of making these nonmarketable Treasury securities available to individuals with relatively small sums to invest,” the Treasury Department said.
About 98 percent of all annual purchases of savings bonds by individuals are for $5,000 or less, according to a Treasury official.
Savings bonds have been subject to purchasing limits before. The last time the limit was as low as $5,000 was in 1973.
Paper EE bonds are purchased for 50 percent of their face value. Electronically purchased EE bonds are sold at their full face value. It doesn’t matter which version you buy; the rate is the same. But the Treasury Department has been pushing investors to go electronic, arguing that it is a more convenient way for people to buy and keep track of their bonds.
Series EE bonds purchased on or after May 1, 2005, earn a fixed rate of return. The current rate is 3 percent.
The I bond is sold at face value so you pay $100 for a $100 bond.
Many risk-averse investors prefer I bonds because they provide a guaranteed rate of return and, most importantly, inflation protection.
The Series I inflation-indexed savings bond was introduced in 1998.
While you may be in a snit about the recent change, I wouldn’t be too irritated. I would question the financial wisdom of investing more than $20,000 a year in savings bonds.
At least consider diversifying so that your money not only keeps pace with inflation but has the opportunity to beat it.
Michelle Singletary: singletarym@washpost.com
