Savings Bonds Purchased, $5 Oops, More on Partial Redemptions

My $5,000 I-Bond online purchase looks like it went off today without a hitch at Treasury Direct. Well, almost. I didn’t pay attention to my BillPay along with my checking account balance and I ended up going below the $1,000 minimum on my Presidential checking account. Doh! At least it’s only a $5 low-balance fee and not a bounced check.

There was also a good question about partial redemptions of Savings Bonds – If you withdraw any of it early (less than 5 years), will you be paying a penalty on all future withdrawals, even if you wait more than 5 years? I e-mailed them (they don’t seem to have a phone number?), and the answer I got was no. Here’s my e-mail and their response:

My e-mail:

Hello,

I have a question regarding the partial redemption available now on electronic Savings Bonds. If, for example, I have a $5,000 I-Bond from which I make a partial redemption of $1000 after twelve months, will the 3-month interest penalty applied to the withdrawn $1,000 also apply to the remaining $4,000 balance, even if I wait the full 30 years to take out the remaining $4,000?

Thank you,

Jonathan

The response from TreasuryDirect:

Dear Jonathan,

The 3 month interest penalty will only apply to the partial amount you redeem.

Janie Marks
Customer Service Specialist

Just ask!

Comments

  1. http://biz.yahoo.com/usat/051024/13187154.html?.v=1

    Dan Pederson says buy it now since the fixed rate on I bonds may go down to 0.5% and you may get only that premium over the interest rate.
    Tom adams of http://www.savings-bond-alert.com says buy later becasue he thinks the fixed rate is linked to the TIPS rate and he expects it to be 1.3-1.5%.
    I am splitting my purchase between today and the end of nov. anyway I am not going to sell them anytime sooner and I dont buy that many $200-$400 worth each month, these are a savings of a last resort for me.

  2. Hi Jonathan,

    I was reading your Old post on buy I-bond Oct. vs. Nov., if you buy in Oct, wouldn’t the interest of 4.8% good only for the month of October, then starting Nov. the new rate would be 6.9% as predicted? From your post it seems rate 4.8% would be the rate until 3/06, am I wrong here? Can you clarify? Thanks.

    10/05 to 3/06: Fixed + Variable = 1.2% + 3.6% = 4.8%
    3/06 to 9/06: Fixed + Variable = 1.2% + 5.72% = 6.92%

  3. sid – yeah two “experts” predicting two completely different things about the fixed rate. THAT helps =)

    Jack – new variable rates are announced on Nov, but I-bonds adjust the rate they pay only once every six months. If you buy in October, the rate will stay at 4.8% until March, when it will adjust to the fixed rate announced in November.

    For example, if you buy in December, the rate will stay for 6 months, and then adjust in June, then again in December, etc.

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