As financial institutions will no longer sell paper savings bonds, the Treasury has upped the purchase limit of electronic Series EE and I savings bonds so that investors retain their savings potential.
Effective Wednesday, January 4, the annual purchase limit of each series of savings bonds has been doubled from $5,000 to $10,000 when they are purchased through TreasuryDirect.gov.
The increase comes soon after the Treasury discontinued the sales of paper savings bonds by financial institutions starting in 2012. Previously, investors could buy up to $5,000 in paper savings bonds and up to $5,000 in electronic bonds of each series per year.
When the Treasury made the announcement, it didn’t mention whether the purchase limits would be raised.
Many investors were left in the dark on the matter since they’ve become reliant on Series I savings bonds to curtail the unattractive deposit rates for online savings accounts and CDs. Without the option of picking up paper savings bonds, investors dreaded the thought of only being able to invest a maximum of $5,000 per year in Series I bonds – leaving any remaining discretionary cash to go to savings accounts and CDs that doled out sub-par returns.
For these investors, this is good news.
Furthermore, American taxpayers may purchase up to $5,000 in Series I paper savings bonds with their tax refunds – that means there is a potential of buying an annual total of $15,000 in Series I savings bonds.
At the moment, Series I savings bonds offer a 3.06% composite rate for the next six months. Even if the composite rate is 0% for the subsequent six months, investors earn an effective 1.53% APY if the savings bonds are redeemed after one year.
The current leading 12-month CDs are available from Doral Bank Direct (1.15% APY) and CIT Bank (1.13% APY).