Special Saving Bonds
Savings bonds or more specifically U.S. savings bonds are a source of investment for college education that involve a low risk factor while investing in them. Some special saving bonds like Series EE and Series I provides us with special tax benefits too. The principals and interests gained from these bonds are safe and are not subjected to market fluctuations.
To understand more on the special saving bonds, lets cover some interesting bond plans.
Education Bond Plan
The Education Bond Plan is a program that provides tax benefits to the bond holder by making the interest on some saving bonds tax free. This is done only if the bond is used for paying for the Qualified Higher Education or if there is a roll over to a 529 plan. A qualified expense includes tuition fee, boarding fee, room fee, book fee etc. Series EE and Series I bonds offer such a facility to the investor. Therefore, it is important for you to keep a record of the information regarding the expenses paid and what bonds are bought by us to meet the expenses. This may include information like the serial number of the bond, date issued, date redeemed, educational institution for whose education bonds are bought, date of payment and the amount paid. Below is a brief description of Series EE and Series I saving bond programs, that provide tax benefits: Series EE Saving Bonds Program These are issued at half the price of the actual bond cost which means that they have a 50% face value. If a bond cost $200, then it will be issued at only $100 price. A maximum of $30,000 face value purchase could be made each year. The interest on these bonds is calculated at 90% of half a year, of the yields on five year treasury securities. This gives us a guarantee to meet their face value in seventeen years. In these bonds, redemption value increases periodically because interest gained is added constantly to the principal amount. The bonds can be redeemed after a period of six months. Redemption before six months costs a penalty charge. Series EE bonds can be bought through Payroll Saving plan or Easy Saver Plan. Series I Savings Bonds These types of bonds unlike Series EE bonds are issued at full face value price. The bonds protect the purchasing power of an investment and guarantees a rate of returns on a combination of inflation rates half yearly and fixed rate of return adjustment. Redemption period for Series I bonds is also six months and could be bought from Easy Saver plan directly or the Payroll Saving Plan. Treasury Inflation-Indexed Securities of United States are similar to Series I bonds except that they dont have the power of special treatment for tax for educational purposes. Zero Coupon Bond Plan
These bond plans are fixed rate and return investment plans. STRIPS is another name for these bonds. STRIPS is actually a Separate Trading of Registered Interest and Principal of Securities. This can be purchased from financial institutions or brokerages. Saving bonds are thus a useful aid in investing for the college education. They are planned perfectly to meet the financial requirements of a student.
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