A registered, non-callable, non-transferable bond issued by the U.S. Government, and backed by its full faith and credit.

Savings bonds differ from other Treasury securities in several ways. U.S. Savings Bonds are non-marketable, meaning that they cannot be bought and sold after they are purchased from the government; therefore, there is no secondary market for savings bonds. The tax benefits associated with savings bonds are significant. Like all treasury securities, they are exempt from state and local taxes, but in the specific case of U.S. Savings Bonds, all federal taxes may be deferred until the bond is redeemed. Therefore, even though interest will accrue, no taxes will be due until that money can be accessed. Additionally, if the money received at redemption is used to pay tuition expenses for the holder, a spouse or a dependent in the same year, the interest earned may be exempt from federal taxes as well. Face valuesrange from $50 to $10,000. also called Read more: http://www.investorwords.com/5195/US_Savings_Bond.html#ix zz1RqU0kah8There are two types of savings bonds being issued today, both with slightly
different features and advantages: Series EE bonds: These are issued for a 30-year term. Both principal and interest are paid in a lump sum when the bond is redeemed. Interest is exempt from state and local taxes, but not federal taxes. Series EE bonds cost half their face value and are sold in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. While the bonds are guaranteed to be worth at least their face value at the end of their terms, they generally reach their face value earlier and continue to build value. Currently, EE bonds hit face value in about 17 years, 13 years before their term ends. The EE is re-priced semiannually, but it only has one rate; there is no inflation component. Since its inception, the EE was a variable rate bond with its rate pegged at 90 percent of the average five-year Treasury securities yield for the preceding six months. As of May 1, 2005, the Treasury made the EE a fixed-rate bond. A new rate is still issued every six months, but the rate you get at purchase is the one you keep for as long as you own the bond. The rate is pegged to the 10-year Treasury average for the preceding month. The current interest rate is 3.5 percent. The government extended the length of time a bond must be held before it can be cashed. The minimum holding period will go from six months to one year effective with bonds issued as of February 1, 200

Series I bonds earn a combined rate, designed to be an inflation hedge. It has a fixed rate of return plus an inflation premium. The fixed rate and the inflation premium are adjusted every May and November by the Treasury Department. But the fixed rate assigned when you buy the bond is good for as long as you hold the bond. The inflation premium ensures that you do not lose the purchasing power of your investment over time. Here's how it works. Suppose you buy an I Bond in December. The current fixed rate that was set in November will be your permanent fixed rate. You'll also get, for six months, whatever inflation premium was set in November. When June rolls around your inflation premium will be changed to whatever rate was established in May, but your fixed rate will remain fixed. For example, bonds purchased between now and October 2005 carry a fixed rate of 1.2 percent, plus an inflation adjustment of 3.58 percent. That gives them an overall yield of 4.8 percent. I bonds increase in value monthly, and interest is compounded semiannually. The interest accrues and is paid at maturity. Which give more bang for the bond? It's all about inflation. If the inflation rate rises faster than bond interest rates, you're probably better off with I-bonds, say some financial planners. Series I bonds are sold in the same denominations as EE bonds, but are purchased at face value, not discount. As with Series EE bonds, the government extended the minimum holding period from six months to one year effective with bonds issued as of Feb.1, 2003. Series HH bonds are not currently available for purchase. They were issued for a 20-year term only in exchange for EE bonds or to reinvest in HH bonds. As of September 1, 2004, this option is no longer available. For current HH bond holders, the gains from their EE bonds aren't taxed until the new HH bonds are cashed or expire in 20 years. HH bonds also make their own taxable payments of new interest every six months, deposited directly into the bondholder's bank account. That new interest is exempt from state and local taxes, but is subject to current federal taxes. The advantage of these bonds was that they could be used to extend the tax deferral of interest EE bonds and provide income. For those currently holding HH bonds, they are especially useful when the bond holder has moved into a lower tax bracket, such as retirement. The current fixed annual rate of interest on HH bonds is 1.5 percent, and that rate is guaranteed for the first 10 years. HH bonds are sold in denominations from $500 to $10,000. They may be redeemed after as little as six months. However, the last issue month for HH bonds will be August 31, 2004. After this date, you will not be able to reinvest you HH/H bonds or exchange your EE/E bonds for HH bonds.
Michelle Samaad and Julie Bandy Bankrate.comEE Bonds are reliable, low-risk governmentbacked savings products that you can use toward financing education, supplemental

retirement income, birthday and graduation gifts, and other special events. Series EE Bonds purchased on or after May 1, 2005, earn a fixed rate of return, letting you know what the bonds are worth at all times. See our press release for more information. EE Bonds purchased between May 1997 and April 30, 2005, are based on 5-year Treasury security yields and earn a variable market-based rate of return. *E Bonds are the predecessor to EE Bonds and are no longer issued by the U.S. Treasury.

Electronic EE Bonds
You can purchase, manage, and redeem electronic EE Bonds safely through a personal TreasuryDirect account. A new program called SmartExchangeSM allows TreasuryDirect account owners to convert their Series E, EE and I paper savings bonds to electronic securities in a special Conversion Linked Account in their online account. NOTE: Paper EE savings bonds can be purchased at most financial institutions or by using

our online mail-in order form.

Key Facts:
Buying Electronic EE Bonds

Sold at face value; i.e., you pay $50 for a $50 bond and it's worth its full value when

it's available for redemption. Purchase in amounts of $25 or more, to the penny. $5,000 maximum purchase in one calendar year. Issued electronically to your designated account.

Buying Paper EE Bonds

Sold at half their face value; i.e., you pay $25 for a $50 bond but it's not worth its

face value until it has matured. Purchase in denominations of $50, $75, $100, $200, $500, $1,000, and $5,000, and

$10,000. $5,000 maximum purchase in one calendar year. Issued as paper bond certificates.

If you redeem EE/E Bonds in the first 5 years, you'll forfeit the 3 most-recent months' interest. If you redeem th

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