New limits on Savings bonds

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
The limit is reduced to $5K/yr -- from $30K/yr.

"December 3, 2007

The annual limitation on purchases of United States Savings Bonds will be set at $5,000 per Social Security Number, effective January 1, 2008. The limit applies separately to Series EE and Series I savings bonds, and separately to bonds issued in paper or electronic form. Under the new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds of each series in a single calendar year, or a total of $20,000, in single ownership form. If paper bonds are issued in co-ownership form, the limit applies to the first-named co-owner. All limits are based on the issue price of the securities....."

See details at http://www.treasurydirect.gov/news/pressroom/pressroom_reducedpurchaselimit.htm

Member Summary
Most Recent Posts
This is what I got in email after purchasing 500$ over the 5k limit:

--
Dear xxx,

Your purchase exceeds the annual savings ... (more)

kallumama (Apr. 25, 2008 @ 3:33a) |

Yes, I've heard of people getting these warnings and nothing happened so far. Perhaps the 'repeated' part is to be avoi... (more)

xerty (Apr. 25, 2008 @ 9:35a) |

At local bank. No fee charged.

klm123 (Apr. 25, 2008 @ 8:27p) |

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

That is extremely lame!

can someone explain why

Huh? But Why?

Would they really prefer to borrow money from China instead of US citizens?

Heh, better yet, can I buy Chinese bonds?

tazzy531 said:
Would they really prefer to borrow money from China instead of US citizens?

Certainly.
It costs a lot less to just get a few billion in one shot from a single buyer than to try to raise the same amount from people buying $50 savings bonds. And then there are the ongoing support and maintenance costs: Issuing bonds, dealing people who have lost their bonds and don't know the serial numbers, dealing with people who forgot their passwords, dealing with burglars who steal bonds and try to cash them, staffing phone lines, redeeming bonds, issuing tax statements,.... If they sell a 10-year bond to China, they can just sell it and forget about it. They don't have to worry about China redeeming it early (China can sell it on the open market to another investor, but unlike Savings Bonds, there is no obligation to redeem the bond whenever China needs its money back).

All in all, the overhead costs of trying to finance the national debt $50 or $100 at a time (or even $30,000 at a time) are quite significant. Savings Bonds are a very inefficient way to raise money.

I guess they figured out that the inflation will catch up because of all the rate cuts and people will be buying and flipping I-bonds.

clampuke said: tazzy531 said:
Would they really prefer to borrow money from China instead of US citizens?

Certainly.
Then just do not allow it - surely it is better borrowing 30,000 from one person vs. borrowing 5,000 each from 6 people, is it not? Makes no sense. So now, they would rather have me open "n" accounts - one in my name, one in my wifes, one for my daughter, etc, etc. each loaning 5000 to the govt. vs. me just loaning 30,000 - sigh!

tazzy531 said: Huh? But Why?

Would they really prefer to borrow money from China instead of US citizens?
Why take deflating dollars when they can take inflating Yuan and pay it back in deflating dollars?

Well if the Feds lowers rates this month, then its definitely time to buy I bonds. It means the Feds will continue to deliver lower rate crack to Wall Street lenders and that they will probably continue to drop rates. Inflation will go up and the I bonds return goes up.

fat9wallet said: The limit is reduced to $5K/yr -- from $30K/yr.
You see the Fed is trying to point out that there is actually lots of deflation going on, so that rather than raise the individual limit periodically for inflation, they actually need to cut it ~85% due to all the deflation in today's economic environment.

Seriously though - who are they kidding with their BS excuse? The Treasury must just have decided to kill the program. EE bonds have been uncompetitive for a while now, and the I bonds are occasionally decent but while inflation is through the roof lately, the CPI has been hacked enough that it doesn't really show it anymore (no energy, housing, etc). Given the Feds still issue TIPS based off the CPI in huge amounts, this move can't be just an indication that they made a conscious decision not to issue inflation-linked debt fearing that the bad inflation numbers are about to catch up to them.

See excellent article linked below: Capital gains (above non capital gains income) up to the 15% threshhold is taxed at 0%, while the remainder is taxed at 15%. (Example 1(c))
article

Tax-Bracket Management

Tax-bracket management uses traditional income/deduction shifting techniques. The goal in this case would be to minimize taxable income to ensure a taxpayer remains in the 15% tax bracket from 2008 through 2010. The examples below assume that, 1) without planning, the taxpayer would exceed the 15% bracket or be unable to fully exploit it, and 2) any ordinary income shifting between years would not increase the taxpayer’s marginal tax bracket. Any loss in monetary value due to accelerated tax payments will be ignored; this should be more than offset by the tax savings from avoiding the higher ordinary rates without planning.

Anticipated income. For projected 2008–2010 income, the goal is to exclude it, accelerate it into 2006 and 2007, defer it to 2011, or convert it to ANCG. Many techniques pertinent to retirees reduce provisional income also, which reduces taxable Social Security benefits.

Shelter wages (earned by semiretirees) by maximizing 401(k) plan or savings incentive match plan for employees (SIMPLE) IRA contributions.
Monitor fixed-income (e.g., certificates of deposit) investment maturities; consider accelerated redemption. Use Series EE or I bonds to defer interest.
Convert taxable interest-yielding investments into tax-free money-market funds or municipal bonds if the tax-free yields are comparable to taxable yields.
Convert ordinary dividends from taxable money market funds to tax-free funds.
Evaluate the desirability of real estate investment trusts (REIT), which generate nonqualified dividends.
Convert traditional IRAs (common for older retirees) with small balances to Roth IRAs to avoid minimum-distribution requirements.
Eliminate the possibility of state income tax refunds by owing state income taxes.
If contemplating a lump-sum distribution of appreciated company stock, determine its original cost basis, which is taxed as ordinary income upon distribution.


That ^^^ in bold is IMHO why the government lowered the limits.

Anybody tried to log on to their TreasuryDirect account lately? I appears they are trying to kill that by making it too difficult to logon. It takes me almost 5 minutes to logon by the time I find my funky account number, hunt and peck the keys on the screwy on screen keyboard, then find the numbers in the stupid new grid thing. And try changing your linked accounts... Apparently it now requires a bank verified signature (a notary is not acceptable). I don't know what somebody would do if they did not have a brick and mortar bank account.

I am thinking similar to fboyfboy....I think they are anticipating the fixed rate to be jumping up sometime soon in the future....so not wanting to see us back the dumptruck up with 30,000 a year into a high locked rate they just limit the dump. I heard you can do 5000 online direct and 5000 paper

Have anyone tried to buy I-Bond using treasury direct lately? It seems that it still allows me to buy $15,000 worth at a time. I went all the way to the confirmation screen. Would it let me do that?

jfunk138, I also hate the new login. If you don't like it, make sure you rate the site "POOR" during the logoff survey. I did.

I hear you can still buy more than the $5k limits, at least for now, but that's unofficial. Still up to the old $30K online, $30K paper I think.

In a few weeks when we get the march inflation numbers, you'll be able to judge the whole next year return for the current I bonds and may want to consider loading up, as least as much as they let you...

I bought 10k electronic in February, the transaction went through no problems. Gonna try for another 10k in April depending on CPI-U numbers.

Bloomberg reports 5-year TIPS rate as -0.21%(NEGATIVE) on 3/10/08. Considerings that Ibonds have 1.2% fixed rate, this is incredible deal.
Keep in mind that the fixed rate of I-bonds will be most likely lowered in May.

If the issue was the cost of managing lots of small bonds, then why don't they just increase the minimum value of bonds that can be bought?

There are very simple explanations why Treasury has reduced the limits for new purchases. Just think about it for a second...............................

Are you ready?


By reducing the allowed purchase amounts of savings bonds, they accomplished at least the following seven goals(possibly more):

1. Instead of using the free of charge TreasuryDirect.gov to buy savings bonds, people are forced to use big banks and pay fees to buy treasury bills. Big banks make more money = GREAT!

2. Instead of buying the savings bonds which are local tax exempt and tax deferred, people have to buy treasury bills/bonds which are taxable. State and Federal Government make more money = GREAT!

3. Instead of saving money and investing in safe instruments, people are more motivated to spend and borrow. Poor people are dependent on the government for handouts. More power to government = GREAT!

4. Lets remind people who is the boss. The more they f..k people, the more powerful they feel. They are as powerful as GOD = GREAT!

5. By making it harder to buy the treasury-protected securities, people will be more likely to invest in to stock market. TO buy stocks, you have to pay fees. Banks make more money = GREAT!

6. By investing in stocks instead of safe savings bonds, some people will loose all their money in stock market. Therefore making them more dependent on the government. More power to government = GREAT!

7. They new that economy was about to tank, and wanted to reduce number of available safe investments that offer higher rate of return than TIPS which they can manipulate. (5-year TIP base rates are negative, while Ibonds pay 1.2%+inflation) Easy for government to manipulate the economy and money flow = GREAT

8. When only few choices are available to people, they start feeling helpless and worthless. Then government can take away the rest of few constitutional right we have left. More power to government.

I have to stop here, otherwise I have another 10 reasons why Feds reduced the limits on savings bonds.

rubicinc said: There are very simple explanations why Treasury has reduced the limits for new purchases. Just think about it for a second...............................

Are you ready?

Yup, but are you ready. Don't let anything so much as the TRUTH to get in the way of your conspiracy theories.


By reducing the allowed purchase amounts of savings bonds, they accomplished at least the following seven goals(possibly more):

1. Instead of using the free of charge TreasuryDirect.gov to buy savings bonds, people are forced to use big banks and pay fees to buy treasury bills. Big banks make more money = GREAT!

Ahhh NO! Treasury bills, notes, bonds, and TIPS are all available free of charge at TreasuryDirect.

2. Instead of buying the savings bonds which are local tax exempt and tax deferred, people have to buy treasury bills/bonds which are taxable. State and Federal Government make more money = GREAT!

Ahhh NO! Treasury bill, notes, bonds, and TIPS are ALL also state and local tax exempt.

3. Instead of saving money and investing in safe instruments, people are more motivated to spend and borrow. Poor people are dependent on the government for handouts. More power to government = GREAT!

Ahhh SO! "Poor people" are hurt by NOT having the ability of investing more that $10,000($5K online, $5K Bank) in EACH series of savings bonds.

4. Lets remind people who is the boss. The more they f..k people, the more powerful they feel. They are as powerful as GOD = GREAT!

Yup, that's it the Treasury stays up all night planning on how they can be the MAN!. Yup that's it.

5. By making it harder to buy the treasury-protected securities, people will be more likely to invest in to stock market. TO buy stocks, you have to pay fees. Banks make more money = GREAT!

Darn, they are making it so hard for those poor people to invest. Actually, it would be a good thing if people are more likely to invest in the stock market. Fees, oh my GOD. This is the least expensive time to invest in market returns. Comissions are negligble, most mutual funds are no-load. If you have more than $10K or $20K per year to invest, you can certainly invest very inexspensivley. I don't know why banks would be making more money, because banks would be the last place I would use to invest.

6. By investing in stocks instead of safe savings bonds, some people will loose all their money in stock market. Therefore making them more dependent on the government. More power to government = GREAT!

Investing (at least partially) into the stock market is the only was to accumulate wealth. To place ALL your savings in savings bonds is sure fire to barely stay ahead of inflation. Of course, I'm sure that is another part of the conspiracy.

7. They new that economy was about to tank, and wanted to reduce number of available safe investments that offer higher rate of return than TIPS which they can manipulate. (5-year TIP base rates are negative, while Ibonds pay 1.2%+inflation) Easy for government to manipulate the economy and money flow = GREAT

Yup, that is it. The big bad boogy man is out to get us. The only reason I bonds are higher than TIPS is because they are set once each six months and thus are lagging the current market rates. Of course, you will be screaming when the next iBond rates reset lower.

8. When only few choices are available to people, they start feeling helpless and worthless. Then government can take away the rest of few constitutional right we have left. More power to government.

That is definately it! The overwhelming masses of the people are feeling helpless and worthless, because they are not able to buy $30K of iBonds online. Oh my GOD, I here it every day, from everybody I meet, NOT!!! I would be surprized if this affects even 1 out of a thousand people. And I can say that very few to none of them are poor.

I have to stop here, otherwise I have another 10 reasons why Feds reduced the limits on savings bonds.
Another 10 wouldn't make any of them right.

Look, I don't like the fact that they have limited my options for fixed income investments. However, I take the reasons they gave on face value. Let's face it very very few people in this country are in a position to save $10K a year in savings bonds. These were always meant for people saving $50 or $100 a month.

My only complaint is that they should have made the limit modulo 12, specifically for this reason. The limit should be $6K or $12K. That would let somebody contribute up to $500 or $1000 per month.

People who have thousands to invest per year have many other options. Maybe not as good as iBonds in some cases, but still options.

Good luck on that "conspiracy theory" thing!

mcomstock said: I bought 10k electronic in February, the transaction went through no problems. Gonna try for another 10k in April depending on CPI-U numbers.

Does anyone know what the downside to exceeding the purchase limit is? Could they void the sale and just give you your initial investment back?

HappyGuy said: Does anyone know what the downside to exceeding the purchase limit is? Could they void the sale and just give you your initial investment back?
Yes, and without interest (read the Treasury Direct FAQ). It's not clear how long they wait either. Would suck to have them wait years until you try to redeem them before they thank you for the interest free loan and return your principle.

On the somewhat brighter side of this mess, I seem to remember you can get extra bonds issued jointly to you and a family member in such a way that it reports to your SSN for taxes but against their (likely unused) $10K annual limit.

The limit is applied to a SSN, so I don't know of any ways to exceed the limit. Possibly something to do with gift bonds?

On TD website, there is a posting called "purchase limits are to be changed". Once you log in to your account, there is a link called: " PURCHASE LIMITS", and it contain the old limits of $30K.

xerty said: HappyGuy said: Does anyone know what the downside to exceeding the purchase limit is? Could they void the sale and just give you your initial investment back?
Yes, and without interest (read the Treasury Direct FAQ). It's not clear how long they wait either. Would suck to have them wait years until you try to redeem them before they thank you for the interest free loan and return your principle.


Can you direct me to the FAQ stating that they could void the sale without giving interest?

I don't see anything mentioned here http://treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm

I also cannot find another means to get around the limit without actually giving away the bond to someone else.

Where can I buy paper savings bonds without fees?

Here’s how the purchase limits work:
you can invest in electronic savings bonds (also referred to as book–entry savings bonds) each calendar year by purchasing as much as:

$5,000 in Series EE Bonds, and
$5,000 in I Series Bonds.
You may also invest the same amount in paper savings bonds -- using your name and social security number -- by purchasing as much as:

$5,000 in Series EE Bonds (which is equivalent to $10,000 face amount), and
$5,000 in I Series Bonds.

Exceptions: Paper savings bonds purchased as gifts aren't included in your annual limit. Also, the purchase amount of electronic savings bonds you transfer, deliver as gifts, or de-link to another TreasuryDirect account holder is applied to the receiver's annual purchase limit in the year the transaction occurs, and not to your own limit.

So, if I am reading this right...I can buy and additional 10k in each of my (very young) kid's names?

I hear they've started enforcing the $5K limits online now, or at least consistently advertising those instead of the old $30K limits. Might be the best you can do now is $5K+$5K per SSN.

This is what I got in email after purchasing 500$ over the 5k limit:

--
Dear xxx,

Your purchase exceeds the annual savings bond purchase limitation. Please be advised the limit is $5,000 per series and TIN per calendar year. Repeated violations may result in an action by this office; for example, a refund of account holdings and/or account closure may occur.

Thank you for using TreasuryDirect.
--

It completed my transaction though so seems like the above email is just a warning.

TreasuryDirect. said: ...Repeated violations may result in an action by this office; for example, a refund of account holdings and/or account closure may occur.
Yes, I've heard of people getting these warnings and nothing happened so far. Perhaps the 'repeated' part is to be avoided - just try to buy $30K worth all at once like you didn't understand the instructions and hope to get away with it (assuming that's what you want).

fboyfboy said: xerty said: HappyGuy said: Does anyone know what the downside to exceeding the purchase limit is? Could they void the sale and just give you your initial investment back?
Yes, and without interest (read the Treasury Direct FAQ). It's not clear how long they wait either. Would suck to have them wait years until you try to redeem them before they thank you for the interest free loan and return your principle.


Can you direct me to the FAQ stating that they could void the sale without giving interest?

I don't see anything mentioned here http://treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm

I also cannot find another means to get around the limit without actually giving away the bond to someone else.

Where can I buy paper savings bonds without fees?


At local bank. No fee charged.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014