Gyroscopic Investing

So I've gotten really weird differing answers from people at treasury direct trying to answer my question about EE bonds doubling after 20 years in electronic form.

I just sent one last "email" to them with wording that I think will pry the right answer out, but based on things I've read on the site and responses I've gotten from TD employees, I'm 99% sure that we DO get the guaranteed doubling after 20 years.

The following link, though a bit dated, seems to very confidently say that we get the 20-year doubling and that everything else is just semantics regarding "face value," etc.

http://www.savings-bond-advisor.com/why ... ace-value/

Lastly, based on a discussion with a TD rep, the $5,000 limits on electronic bonds aren't going up.  I'm surprised and disappointed to see savings bond limits shrink so rapidly from the mid-2000's.  I suppose it's still a pretty nice spot for cash over time, but it's just going to take a little longer for people to build up a useful savings bond balance to help juice their cash a bit.

moda0306 wrote: I just sent one last "email" to them with wording that I think will pry the right answer out, but based on things I've read on the site and responses I've gotten from TD employees, I'm 99% sure that we DO get the guaranteed doubling after 20 years.

Thanks for looking into this.  Have you seen any indication on the TreasuryDirect website that the 20-year doubling wouldn't still be around going forward?  I have still never seen anything specific, although I have seen several references that seemed to indicate it'd be staying.

Such as:

Whoever put together the TD website wrote:At a minimum, the U.S. Treasury guarantees that an EE Bond's value will double after 20 years, its original maturity, and it will continue to earn the fixed rate unless a new rate or rate structure is announced. If a bond does not double in value as the result of applying the fixed rate for 20 years, the U.S. Treasury will make a one-time adjustment at original maturity to make up the difference. Series EE bonds earn interest for 30 years.

http://www.treasurydirect.gov/indiv/res ... dterms.htm

One lady I talked to indicated they'd work the same going forward, but this is the same lady who sounded like she had NO idea how EE bonds worked based on her description of paper vs electronic.

This is still too cobbled for me to feel comfortable, but with long-bond rates at 2.9%, cash at near 0%, and me in hard-accumulation mode, I really hope they keep this feature.

I'll let you know when I finally get a difinitive statement... but since this is gov't we're talking about here, I doubt they'll be held to anything that they misunderstand and misinform bond-purchasers on.

I think the treasury would have to do something pretty fundamental to the EE bonds to get them to switch out of having the 20-year doubling featurn.

http://www.treasurydirect.gov/indiv/res ... dterms.htm

In this section, you'll see that there's a chart showing what they consider to be different EE bonds of years past, and their "original maturity."  Current EE bonds have a stated "original maturity" of 20 years, which is where they get the doubling.

They've had this trait for decades.  They'd have to fundamentally change EE bonds for this to go away.  I guess if we don't see this language on their site on 1/1/2012 we'll know they tried to slip one by us.

VERDICT!!!!!!!!!!!!!

I finally talked to someone who knew what they were talking about.  Sorry I have no written correspondence, but this lady knew her stuff.

1) Electronic EE bonds WILL have a 20-year doubling JUST LIKE paper EE bonds

2) This will last into 2012!  Their "original maturity" of 20 years will remain in tact, as will the guaranteed doubling.

3) She does not think that they will up the limit to $10,000 on electronic I/EE bonds in 2012, but she hasn't received full word yet. 

Can we get a petition to Geithner promising populist uprising against "the 1%," including the fed & treasury, if we don't get our $10k limit?

There you have it... I'll let you know if/when I hear anything on the doubling.

In the mean time, we still have $5k limits on BOTH I & EE bonds for BOTH us and our spouse... and don't forget about what is likely to be the LAST year of paper I-bond tax refunds on form 8888.  Contribute a nice, fat amount as a 1/15 4th quarter estimated tax payment if you don't think you'll have enough paid in by tax time.

I found an interesting link... apparently (probably for your kids if you're loading them up on I/EE bonds) you can elect to tax the accrued interest annually.

http://www.savingsbonds.com/bond_basics ... -bonds.cfm

The way I found this was from MSN Money article in July praising savings bonds and explaining the changes.  The comments were in complete outrage at buying any government-issued bonds... "might as well be taking a match to your money," one post read.

Oh, and TLT has returned 28% since then, and the artcle/comments were in July, less than 6 months ago.

moda0306 wrote:In the mean time, we still have $5k limits on BOTH I & EE bonds for BOTH us and our spouse... and don't forget about what is likely to be the LAST year of paper I-bond tax refunds on form 8888.  Contribute a nice, fat amount as a 1/15 4th quarter estimated tax payment if you don't think you'll have enough paid in by tax time.

I'm obviously missing something here, but my brain isn't picking up on it. I understand that making a larger 4th Quarter Estimated Tax payment will force a refund that can be redeemed as I Bonds, but what is the advantage to buying I Bonds through a tax refund? Why not just buy them with regular cash? My understanding is that the tax refund route does not allow us to bypass the normal I bond limit.

Gumby, it's for people who want paper instead of electronic I-bonds.  The only way to get them after Dec 31 is through a tax refund from the IRS, and some people have decided to load up on overpayments of estimated tax (using the $ they would have previously used to invest in I-bonds) to make sure they have enough refund to get paper I-bonds back.

I wonder.  What safety measures does the Treasury Department have in place with everyone's electronic bonds against a massive solar flare generating a EMP in 2012?

MG

smurff wrote: Gumby, it's for people who want paper instead of electronic I-bonds.  The only way to get them after Dec 31 is through a tax refund from the IRS, and some people have decided to load up on overpayments of estimated tax (using the $ they would have previously used to invest in I-bonds) to make sure they have enough refund to get paper I-bonds back.

MG,

I don't know but that's a great point.  I'd have to think that even if we had a giant electronic outage, the gov't would still have enough "existance clout" where cash (the real stuff) would still have value.  That and your physical gold are about all that I'd count on in this scenario.

In today's age of uber-low interest rates, I definitely think having a nice stash of portable financial assets is a must... yes it sucks not to have it in a retirement account, but so is the balance of total return and liquidity.

I think this falls well into the realm of taking a good, hard look at what kind of wealth we could lose simply as a result of a major computer system crash.

MachineGhost wrote: I wonder.  What safety measures does the Treasury Department have in place with everyone's electronic bonds against a massive solar flare generating a EMP in 2012?

MG

smurff wrote: Gumby, it's for people who want paper instead of electronic I-bonds.  The only way to get them after Dec 31 is through a tax refund from the IRS, and some people have decided to load up on overpayments of estimated tax (using the $ they would have previously used to invest in I-bonds) to make sure they have enough refund to get paper I-bonds back.

MG, that's a funny scenario to think about, but the reality is that the government and large banks have everyone's financial state backed up in 2 or 3 different places.  I work with computers and I know that the government, as well as large financial institutions, have to test their DR (disaster recovery) plans every 6-12 months.  These tests involve restoring every single piece of data from backup tapes or some other offsite stored piece of media.  Even if a solar flare happened, these backup tapes are stored at Iron Mountain, inside, literally, a mountain.  The vaults are inside a granite mountain carved and secured with multiple layers of armed guards, steel doors, and other physical security.

So, when I watch Fight Club, the scene at the end where they explode all the credit card companies systems?  I know it's fake because in reality they would restore their systems on the opposite side of the Hudson river the next day and you would still owe the same amount of money that you owe today... Sorry to burst your bubble.

Storm,

That "Fortress Bank" sounds interesting as hell... have any good articles or something similar on the topic?

It is nice to think these exist... but it still demands some transmission mechanism to our pocketbooks as the financial/electronic infrastructure gets rebuilt.  In that period of time, it would be nice to have some greenbacks and gold coins.

moda0306 wrote: Storm,

That "Fortress Bank" sounds interesting as hell... have any good articles or something similar on the topic?

It is nice to think these exist... but it still demands some transmission mechanism to our pocketbooks as the financial/electronic infrastructure gets rebuilt.  In that period of time, it would be nice to have some greenbacks and gold coins.

Here's an interesting video on Iron Mountain:  http://www.youtube.com/watch?v=2aou6c2MOmg