Posts Tagged ‘united states government’

How Do Savings Bonds Work?

Friday, April 10th, 2009

What are Savings Bonds?

Savings bonds are a major offering in credit unions and at banks. It is important to know what savings bonds are all about so that you can understand whether or not they will benefit you in any way. This page is going to take you through some of the basics of what savings bonds are and how they are used.

What are Savings Bonds?

Savings bonds are securities that are issued by the United States Treasury Department. They are designed to provide funding dollars for the United States Government. In return for making use of your money, the government can then pay you interest. This discussion is going to specifically focus on covering EE Savings Bonds and I Savings Bonds.

How much interest is earned in Savings Bonds?

The interest rates generally depend upon the economic conditions. As interest rates in general begin to rise, so will the interest rates that are paid on these savings bonds. If you are looking for exact numbers based on the current conditions, the best resource is the website for the Bureau of Public Debt. In general, you will find that the interest rates are fairly competitive as far as safe, government backed investments go, and you may even benefit from additional tax incentives to enhance the returns that you receive.

What Tax Benefits are offered by Savings Bonds?

This is really going to depend on your individual situation. Depending on your situation, you may be able to earn some really nice benefits simply by using savings bonds. For starters, for example, savings bonds do not pay periodic interest that is subject to an income tax. Instead, they increase in value over the span of years. What this means is that you can delay claiming the interest until your bonds are redeemed, or until they mature, which is around 30 years following their issuance. If you do not want to claim the income now, but you want to claim the income later instead, then savings bonds can make this possible.

Another tax benefit that is associated with savings bonds is the Educational Tax Exclusion, or the Educational Savings Bond Program. If you cash your bonds in for use for qualified higher education related expenses, you may be able to exclude that income all together from your taxes. It is important that you are sure to follow the rule regarding the expenses, income limits and other regulations that exist if you want to take full advantage of this. For more information about this exclusion program, visit the website for the Savings Bond for Education Program.

Finally, savings bond interest is exempt both from state income taxes and local income taxes. What this means is that you can spend more of what you earn without worrying about the taxes. Depending on your state that you live in, this may be a big deal, but it may be insignificant instead so find out about your state’s regulations before you invest.

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Originally posted 2020-12-10 05:03:46. Republished by Old Post Promoter

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How do Savings Bonds Work

Friday, March 27th, 2009

Wondering Why You Should Invest in US Savings Bonds?

Are you wondering why you should invest in United States savings bonds, or how savings bonds work? This is a question that not enough people are considering these days, because most people are pressing their luck instead by gambling with stocks and other investments. So many people are turning to penny stocks thinking that they cannot lose, but this thrilling stock market is no way to turn a buck. Instead, people should look at savings bonds as a valuable part of an investment portfolio even if they do not appear to be as exciting as an investment.

First of all, you need to understand what a U.S. Savings Bond is if you want to take advantage of these lucrative investments. Back in the day, savings bonds were a popular form of long term investment for people who could not afford to buy common stock. This is back when a long term investment was only an investment that lasted longer than a couple of weeks. There are plenty of different savings bond options available to you out there, but the ones that are the best and the most worthy of your time are the ones that are backed by the United States. At their basic level, these savings bonds are a promise that if you lend money to the government, you will get it back with interest attached. The one risk lies in that the entity you lend to may not be able to pay it off as they have agreed to. However, when lending to the United States Government through US treasury bonds, the risk is a great deal less. Unless the entire American government goes bankrupt, you will eventually get your money back and you will earn interest in the process.

For all intents and purposes, you are lending money to the government when you purchase a United States savings bond. In the days of huge deficits, it is much easier for the United States government to raise money by selling US treasury bonds and savings bonds than to have to go to foreign lenders who require much larger interest rates and much higher returns on their investments. US treasury savings bonds are better for the government and the country because they do not require American citizens to pay taxes to pay foreign governments back for their loans.

Not only is this a lucrative deal for the government when it needs financial assistance, but because of compounding interest, it is also a lucrative deal for you. If you begin with a $1000 initial investment and make $50 monthly deposits, after taxes your nest egg would be nearly $20,000. Increase the interest rate by only a little bit to 3 percent and you will have a nest egg of $22,000 or more. If you think you can put away $100 a month instead of $50, your nest egg will grow exponentially to $42,000. There are also tax benefits associated with these bills that you will want to look into as well.

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Originally posted 2020-11-26 05:01:05. Republished by Old Post Promoter

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