Articles & Advice on Bonds > No, The Sky Is Not Falling
No, The Sky Is Not Falling - New Savings Bond Rates - May 2009
What should you do with your existing Series I Savings Bonds?
First, if they were my Series I bonds I wouldn't do a thing. This is a minor bump in the road. Many people have lost as much as 40% of the value of their stocks, 401k values, 529 funds and mutual funds. Savings bond owners have not lost any of the value of their savings bonds.
This 6 month freeze for your savings bonds growth is a small price to pay for the overall safety and security of your investment. In fact, some of you have told me that if it weren't for savings bonds, they would have had to sell some of their stocks to carry them through these tough times.
Inflation will be back - SOONER THAN YOU THINK!
Once the economic crisis bottoms out, (there are already signs that the economy is returning to normal in many areas), and the Federal Government begins to raise interest rates, inflation will once again rear its ugly head. This is perfect for Series I Savings Bonds and is exactly the kind of economic situation that Series I Savings Bonds were created for! So, as the saying goes, you got to be in it to win it.
My suggestion for you the I Savings Bonds you currently own... Hold tight - better days will arrive before the end of 2009.
Should I Stop Purchasing New Series I Savings Bond?
As far as stopping the purchase of new Series I Savings Bonds, you have got to be kidding, of course you should. For the same reasons that I am suggesting that you hold onto your existing savings bonds, you should keep to your periodic, planned purchases of Series I Savings Bonds. If you are in a employer sponsored payroll savings plan to purchase Series I bonds, hang in there. When inflation starts up again, you'll be glad you did.
What should I do with my Series EE Savings Bonds?
I would continue to hold onto what I already own in EE Savings Bonds. The potential tax consequences and possible penalties could offset any growth that you may have already realized. EE bonds will continue to earn interest during the next 6 month period - and beyond - although it will probably be at a lower rate. Each Savings Bond should be considered on a case by case basis.
I have given up trying to make long term sense of purchasing EE bonds. The actions taken by the Treasury Department gives me cause to believe that the government may discontinue the EE bond program sometime soon. The rate of interest for the Series EE bond is so low that it is most likely that no one - except uninformed savings bond purchasers - will buy them.
Series EE bonds fit the pattern of how the Treasury Department has eliminated certain savings bond programs in the past - see the demise of the HH bond program announced back in January of 2004. First they lower the interest rate so that not too many people will purchase them. Then a short time later, they announce that the program will be "discontinued" due to a "lack of interest on the part of the public".
If you are in an employer sponsored payroll deduction plan, I suggest that you switch over to purchasing Series I Savings Bonds as quickly as you can.
If you already have a subscription to the Savings Bond Guru, you already have the finest tool available to evaluate your own savings bond situation and create your own exit strategy - if in fact you need one. If you don't have an active subscription to the Savings Bond Guru, you can use our FREE calculator at Savingsbonds.com/Savings-Bond-Calculator to learn how your bonds are performing.
You heard it here first.
Jack Quinn is the owner/founder of savingsbonds.com. He is the creator of the Savings Bond Guru which offers the pro-active, color-coded, Savings Bond Performance Report©. Jack has been providing suggestions and guidance to savings bond owners since 1994. He can be reached at email@example.com.