Looking for a reliable, low-risk investment for your money? Then consider investing in savings bonds. According to Investment.gov, 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.” Admittedly, investing in savings bonds is one of the least sexy investments out there, ranking right along with savings accounts. Yet, 1 in 5 Americans are investing in savings bonds. Surely, there must be a reason why they would choose to invest their hard-earned money this way and purchase US savings bonds.
Investing in savings bonds can mean a number of benefits for the investor. While it will certainly not lead you to a homerun, it is, however, the safest, most reliable investment option available. The reason, of course, is that investing in savings bonds means you are fully guaranteed by the US Government itself.
Another reason is that investing in savings bond can free you from local and state income tax returns to a certain degree. The savings bonds themselves are tax-free, and this, of course, increases their yield. In addition, savings bonds are tax-deferred. This means that taxes are paid when you sell the bonds. So when you are in a bracket that is lower than average, that’s the time to claim your income.
Aside from that, if you bought your bonds before January 1990, they may be free from federal tax altogether if you used them to pay for your college tuition of your child. Note that this benefit only applies to parents who are eligible under the income level requirement.
Savings Bonds: How to Invest
Unlike the stock market, investing in savings bonds does not promise any high yields. Because the interest rates are very low compared to the stock market, many people are turned away by this. Still, investing in savings bonds is a safe bet if you are planning to use the money to pay for your child’s college tuition or for supplement retirement income. That way when things go wrong, you have a reliable source of financial support in the form of savings bonds.
One can never predict the performance of the stock market. That is part of the risk involved, which you can avoid by investing in savings bonds. If the stock market plunges and savings interest rates are likewise not performing well, savings bonds become more attractive.
However, remember this: do not use savings bonds as basis for your retirement plan. They do not provide enough yield to properly support you when you retire. Instead, invest in savings bonds as a supplement to your existing 401(k) or other retirement options. The beauty in investing in savings bonds is that, while you won’t get rich, you are not likely to lose your shirt either. When you come right down to it, you are safe, which is definitely not a bad thing.
To learn more about savings bonds and how you should invest, be sure to visit Investor.gov.