Montanans asking about Patriot Bonds

1/16/2002

              BOZEMAN – A Montana State University Extension economist says she has gotten quite a few phone calls recently asking about the new U.S. "Patriot Bonds."

            "Patriot Bonds are a new form of Series EE Savings Bond that earn interest tax-free until they are cashed," says Marsha Goetting, MSU Extension family economics specialist. They are a traditional and safe way of saving for retirement or for a child's college expenses.

            Goetting said people used to laugh at folks who had money in EE bonds because the interest rates were low compared to the stock market. However, some EE-investors are having the last laugh: They still have their principal and many people who invested in the stock market have seen their principal reduced.

            The inscription "Patriot Bond" appeared on the new Series EE savings bonds Dec. 11, 2001 and will continue indefinitely. The Treasury Department's Web site says the new inscription is intended to express support for the rebuilding and war efforts, but that the proceeds from the sale go into the general fund and are not earmarked specifically to pay for the War on Terrorism.

            Series EE savings bonds are U.S. Treasury securities that earn 90 percent of market yields on five-year Treasury securities. Interest is compounded semiannually and bonds increase in value every month. A bond may be cashed after six months, but bonds cashed before they are five years old are subject to a three-month interest penalty. EE bonds stop earning interest at 30 years. The bonds are free of state and local income taxes. Federal tax on interest earned can be deferred until a bond is cashed or reaches its 30-year maturity, whichever comes first.

            You can check the present rates of returns on EE bonds by going to the Web site: http://www.ussavingsbonds.gov/

Recently, the rate through April 2002 is 4.07 percent.

            Savings bonds can be purchased in denominations from $50 to $10,000 on the web site, or through banks or employers. However, those purchased through employers might not have the "Patriot Bond" inscription, because they are processed by different organizations using a variety of inscription techniques. The purchase price is half the face amount of the bond. All savings bonds require the social security number of the purchaser or of the person to whom it is being given.

            "The neat thing about purchasing savings bonds through your employer is that the investment comes off the top. What we don't see, we often don't spend," says Goetting.

Send questions or comments to Goetting and Carol Flaherty, MSU Communications Services, Bozeman, MT 59717 or email them at carolf@montana.edu.

You are the 13029th person to access this page.