US Savings Bonds - Series EE use to be sold at a discount. A $100 bond was sold for $50 and reached full value in 20 years. That has not been true for many years, or so I thought. I see so many videos insisting EE bonds are still sold at a discount that I’m starting to doubt myself. They are sold at full face-value, right? When was the last time they were sold at a discount?
May 2005 was the last sale date for the discounted bonds:
How Series EE Savings Bonds are Taxed - EFPR How Series EE Savings Bonds are Taxed - EFPR
Note that the shorter term government security T-bills (“zero-coupon”) are still purchased at discount. The intermediate securities have periodic interest payments. For the average person it doesn’t really matter which one they use, just what the actual return percentage would be. But it does require some understanding of the differences when you invest.
EE bonds are sold at face value, but they are guaranteed to at least double in value if held for 20 years. In other words, if the accumulated interest after 20 years isn’t enough to double the value, the Treasury will add enough extra to make it worth double what you paid for it. It’s almost always best to cash it in after 20 years, but if you then choose to hold on to it, it will continue to earn interest (typically at a low interest rate) for another ten years. After that, it is still redeemable forever but will not earn any further interest after 30 years.
So if you buy a $10,000 bond today, it is guaranteed to be worth 20,000 in 2045. If you erroneously (but understandably) call 20,000 the face value then what you heard would be true. But technically the face value is 10,000.
That’s not what they are talking about. They are talking about buying a $100 face value bond for $50.
Isn’t this just a matter of semantics? Spend X dollars on a bond, worth 2X in 20 years. What difference what the face value is?
It certainly does when teaching students about using US bonds as a savings device. They can understand buying a $100 bond for $100 and earning interest. Buying at a discount is an extra level of complexity. Also, saying you buy a bond at a discount is just incorrect. A $500 bond costs $500, not $250. I want to teach my students facts not things that were true 20 years ago, not now.
Didn’t pick up that this was a teaching issue. I agree that it makes more sense for the face value to be the purchase price. But from an investment standpoint it’s still semantics.
I got a few savings bonds as gifts when I was a kid. Always figured the “discounted” purchase price was a way for grandma to give you something that said “$25” while only spending “$12.50”.