You know those paper bonds that you got from Grandma and Grandpa as a kid? Well kiss those goodbye! Yup, as in non-existent. It looks like the Treasury is being forced to make some serious cut backs and one of those cutbacks is physical United States savings bonds. The Bureau of the Public Debt made this announcement on July 12, 2011.
The official date for a 100% phasing out of paper treasury bonds is slated for January 1, 2012 according to Treasury Direct. Their goal is to save the US tax payer 70 million dollars over the course of five years with this new procedure.
So, how will you be able to buy Treasury bonds going forward? Well, thankfully the Treasury will still offer bonds, you just won’t be able to hold them in your bedroom or in a vault in your basement. You are going to have to purchase them through their online website at Treasury Direct.
To be honest, this takes away from the “cool” factor of holding physical bonds in your hands. You can still purchase a gift box through their website, but this gift box will be digital. Once the person you bought it for turns 18, the gift box can be redeemed.
When I first heard about this, some definite drawbacks came to mind. Yes, purchasing and holding bonds over the internet is great and convenient but what are the risks associated with that?
Drawbacks to Eliminating Paper Bonds
- More complicated: The new process is much more complicated. It’s not as simple as handing over a piece of paper. Now, there is an application process and a separate redemption process online. Like I already mentioned, a virtual gift box will take over. A representative for the Department even admits, “it’s complicated.” If the rep is saying that this soon to the switch to the internet, that does not bode well.
- No physical ownership: Yes, having the government store your treasury bonds for you feels safer, but you lose that “sense” of ownership.
Positives About the Change to Electronic Bonds
-No worries about losing them: I don’t know about you, but holding physical investments kind of scare me. Worries like fire, flooding, and robberies come to mind. Now, all those worries can be tossed out the door. I can see where people will love this peace of mind. Now, if something happens to your bonds, it will be covered by the government. No more worries.
-No more safety deposit box: Many people hold their treasury bonds in safety deposit boxes at local banks. Now, you won’t have to do this. Since it’s all online, you can ditch the safety deposit box and use that money for something else.
I’m sure you’re wondering what you will be able to do through their Treasury direct website.
Here are some of the features that will be rolled out:
- Buy, manage, and redeem Series EE and I electronic savings bonds.
- Convert Series EE and I paper savings bonds to electronic through the SmartExchange® feature.
- Purchase electronic savings bonds as a gift.
- Enroll in a payroll savings plan for purchasing electronic bonds.
- Invest in other Treasury securities such as bills, notes, bonds, and TIPS (Treasury Inflation-Protected Securities).