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Retirement Discussions / Retirement
|Subject: Re: Purchase of Bond||Date: 7/24/2001 3:33 PM|
|Author: jrr7||Number: 121 of 294|
You may get more responses in the "Bonds" board:
For Retirement questions, ask on the "Retirement Investing" board:
A US Savings Bond pays interest according to a set formula. The formula is always the same but some of the parameters in the formula may differ. For Series E/EE bonds, the interest rate is based on the rates on Treasury securities; for series I bonds the interest rate is based on the inflation rate. [Series H/HH bonds are different beasts in that they throw off income regularly and have a completely fixed rate.]
However, to cover the cost of accepting the money, issuing the bond, etc. the government charges a 3 month interest penalty. For instance if you cash it in after 1 year, you only get 9 months worth of interest. If you cash it in after 4 years and 3 months, you only get 4 years worth of interest.
Once you get to 5 years the penalty disappears.
There are some credit card tricks you can use to counteract the 3 month penalty.
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