A Guaranteed 3.5% Annual Return Through 2037

Happy New Year!

While I always find it hard to believe how quickly one year blends into the next, I know a lot of investors have a hard time sticking to investments for even a few months.

Perhaps the best thing to do is buy something and just put it away for a couple decades. That’s precisely what I did back in the late 1980s … and precisely what I’m going to suggest you consider doing today.

It all starts with a something I found in one of my moving boxes — a group of old Series EE savings bonds originally issued during various Decembers between 1985 and 1988.

All of them were purchased by my grandparents, no doubt as Christmas gifts when I was my daughter’s age.

And while you may continue to think of boring old Series EE savings bonds as true relics from the past … there are at least two reasons — beyond my own personal nostalgia — to revisit them right now.

Reason No. 1, favorable tax treatment, is pretty widely known …

Like Treasuries, interest from Series EE savings bonds is exempt from state taxes.

Plus, an owner or co-owner can typically exclude income from Series EE savings bonds from federal income taxation. That is, if the money is used for qualified higher-education expenses in the same year the redemption occurred. (Just know that there ARE income restrictions in place.)

Still, at the very least, you get the chance to defer taxes on your savings bond earnings for as long as you hold the bond through its 30-year lifespan.

But there’s also one less-recognized advantage of buying Series EE savings bonds right now…

The Treasury Department currently guarantees that new issues of Series EE savings bonds will double in value 20 years from their original issue date.

You wouldn’t know this by looking at the advertised rate on new EE bonds purchased between Nov. 1, 2016, and April 30, 2017. That figure is a meager 0.1%.

But again, anyone who holds those bonds for the next 20 years will end up getting an effective annual interest rate of 3.53% … 100% guaranteed with zero risk of loss.

Heck, even a 30-year Treasury is only yielding roughly 3.1% at the moment!

So Series EE Savings Bonds give you more annual interest and only require you to hold them two-thirds as long. (Though you can continue collecting interest for a full 30 years, as well.)

The only catch? Like I-Bonds, you can only buy $10,000 per Social Security number a year.

You also need to hold them for at least one year. And you’ll forfeit three months of interest if you redeem your bonds within the first five years.

But again, if you’re the kind of person who can tuck them away for a couple decades — either for yourself or a future college student in your life — it might be a good time to take another look at these boring, old bonds.

Best wishes,
Nilus Mattive