Q: During the 1950s, I was introduced to government bonds. We sometimes received them as gifts from friends or relatives for birthdays. I kept looking forward to using them as a down payment on a car. I wanted to do this for someone again, but now I am told that they are available only to big investors through financial managers. Why is this?
Todd Scott, of Belleville, IL
A: Whoever told you that only the Warren Buffetts of the world can now buy government bonds needs a serious refresher course in Investing 101.
It’s true you can no longer walk into a bank and buy them like you used to, but any John and Jane Q. Public can still buy a $25 Series EE or I bond for themselves or as gifts easily online. However, you may reconsider once you learn the current rate of return. While you’re buying safety and can feel patriotic, an EE bond purchased today, for example, will pay you just one-tenth of 1 percent annually over most of its 30-year interest-bearing life. Unless we go into the rockiest economic slide we’ve ever seen, that wouldn’t begin to cover even the mildest long-term inflation imaginable.
Big changes started coming to those popular EE bonds in 2005. From May 1997 to April 30, 2005, EE bonds earned a variable rate of interest, updated every six months, depending on what was going on in the economy at large. But starting May 1, 2005, they began earning a fixed rate of interest for 30 years that is set when you buy the bond. (However, the interest may be adjusted after 20 years.) Series EE bonds bought through Halloween this year pay just a tenth of a percent, added monthly and compounded semiannually, for at least 20 years. Series I bonds, whose interest is figured a different way, currently pay a smidgen more — .26 percent.
But the sea change that led to your misunderstanding came six years later when the Bureau of the Public Debt announced that as of Jan. 1, 2012, the government would no longer sell paper savings bonds at financial institutions. Instead, the bureau shifted all sales of Series EE and I bonds to its Internet site, www.treasurydirect.gov, where tech-savvy people had been able to buy such bonds 24/7 since 2002.
The move continued the Department of the Treasury’s all-electronic initiative announced in April 2010. Already at the end of 2010, the department had stopped the sale of paper bonds through payroll plans. In 2011, the government estimated that it would save $120 million in printing, mailing and other paperwork over the next five years by ending the sale of paper bonds.
Now (it says) in 10 minutes or less you can open your personal TreasuryDirect account, through which you can buy bonds and then manage your securities. All you need are the usual forms of ID: an e-mail address, Social Security number, drivers license number and savings or checking account number along with your bank’s routing number. Another advantage is that because EE and I bonds are now bought electronically, you can purchase them in even penny increments from $25 up to $10,000 per year. No longer do you have to buy a certain denomination.
You can purchase them as gifts, although the recipient also has to have a TreasuryDirect account. If the recipient is under 18, you can set up a minor account and hold the bond in a “Gift Box” until you do. Just remember that a $25 EE bond purchased today would be worth only about $26 in 2046, although if interest rates start to increase, you can sell them after five years without penalty. There are also certain tax advantages to using I bonds to pay for education expenses. For all the details, go to www.TreasuryDirect.gov. You can even find a savings bond calculator (which I’ve used for years) to determine what the bonds you currently own are worth.
Q: Can you tell me why Sara Lee stopped selling its banana cake? We miss it!
Kathy, of Belleville
A: They say nobody doesn’t like Sara Lee, but there apparently are regions in the country that don’t go bananas over your favorite cake.
For reasons she couldn’t fully explain, a Sara Lee spokeswoman told me that the banana cake simply doesn’t sell well in certain areas and, as a result, is difficult to find in supermarkets. Unfortunately, St. Louis is one of those areas. She could not find one store in a 100-mile radius of your ZIP code that stocked it.
She offered two solutions. You might look for single-serving Sara Lee Iced Banana Cakes in service station convenience stores or you might find it at Costco, if you happen to shop there. Otherwise, if you’re friendly with supermarket managers, ask if they could get a few through their distributor; ask for UPC 3210002661. If you’d like to complain further, call the Sara Lee dessert line at 800-323-7117. Try to be sweet, though.
When were U.S. savings bonds introduced?
Answer to Friday’s trivia: Today, a “loophole” is often used to describe an ambiguity in a system that allows you to evade or circumvent a law or obligation. But centuries ago they literally could have helped protect your life. Those tall, narrow slits you see in old castle walls were used as protective means to shoot arrows at invaders storming the castle. Sometimes called arrowslits, they also were known as arrow loops — or loopholes. Some attribute their origin to Archimedes in the Siege of Syracuse in 214 B.C.