What are the benefits of U.S. Savings Bonds?
Savings bonds begin accumulating interest in the month they are purchased. All of the interest earned on Series EE bonds is free from federal income tax until the bonds are cashed. If an employee uses the bonds to pay for their children’s college education, the interest may be totally tax-free. These bonds are purchased with after-tax wages. To buy a bond, an employee pays one-half of its face value. Before they can buy savings bonds using wage deductions, they have to complete and sign an enrollment card. This card includes information on the amount of money they want withheld, who their beneficiaries are (that is, who will get the bond if they die) and the kind of bonds they want. Series I bonds are “inflation adjusted”, which means, if inflation goes up significantly, the interest rate on the bonds will also increase.
