Ask Money

Why can’t I buy more savings bonds?

Marketplace Staff Aug 9, 2013


Why are we being prevented from buying over $10,000 in series-I bonds a year (online). History: I have used gov’t bonds (now series-I) as my savings-account (for emergency use, etc. after keeping on deposit the required months). We used to get paper bonds (for grandchildren as well as ourselves) but now we are prevented for doing that. I think a couple years ago, the limit was $30,000 per year (which didn’t make sense since the gov’t seems to need the money). I tried to deposit over $10,000 this year installments and were told that if I continued, they would close my account. Why? Al, Kingston, N.Y.


Chris Farrell Aug 9, 2013 Economics Editor
I wish I knew why you can’t buy more savings bonds annually. Like you, I am a fan of U.S. savings bonds, especially the I-bond version. There’s no credit risk with savings bonds. You earn some interest on your money. There are no commission costs to buy and sell savings bonds. The interest payments are tax-deferred until the bonds are  cashed in. You don’t pay state and local government taxes when you redeem the bonds (You do pay federal income tax). I-bonds are specifically designed to be a hedge against inflation, the scourge of long-term savers.

Savings bonds are geared toward small saver on Main Street, not Wall Street and the banking industry. U.S. savings bonds are one of the great brand names in finance. Yet Treasury has dramatically shrunk the program.

Treasury slashed the annual amount an individual could buy from a maximum of $120,000 in 2007 to $20,000 in 2008 ($10,000 in I-bonds and $10,000 in Series EE). You can no longer buy paper savings bonds over the counter, say, at a bank or credit union. Everything is electronic, although you can use your tax refund to buy another $5,000 in bonds and they can be issued in paper form (If you use your tax refund your total purchase a year can total $25,000).

The move toward electronic-only purchases is a cost-cutting move. I think a major reason behind the narrowing of the program is that the financial services industry doesn’t like the competition. Still, I wish Treasury would reverse course and expand the program, marketing savings bonds to ordinary folks at everything from the local bank to the big box retailer to the fast food restaurant. (Would you like to buy a savings bond with your fries? Why not?) Instead of boating about money saved by abandoning issuing savings bonds on paper how about focusing on making more people aware of the program?

Savings bonds smartly and cheaply rewarded thrift for an earlier generation. They could do the same for the next generation.

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