FEATURES OF I BONDS

INVESTING IN AND REDEEMING I BONDS

HONORING GREAT AMERICANS

FOR MORE INFORMATION ABOUT I BONDS

FEATURES OF I BONDS

1. What are I Bonds?

I Bonds are a new type of bond designed for investors seeking to protect the purchasing power of their investment and earn a guaranteed real rate of return. I Bonds are an accrual-type security--meaning interest is added to the bond monthly and paid when the bond is cashed. I Bonds are sold at face value--you pay $50 for a $50 bond--and they grow in value with inflation-indexed earnings for up to 30 years.

2. Why is the Treasury offering the I Bond and will it replace Series EE bonds?

The Treasury is offering the I Bond to encourage more Americans to save for the future. We are offering investors a bond with a fixed rate combined with semiannual inflation adjustments that will help protect purchasing power.

The I Bond will not replace Series EE bonds; both will be on sale to give investors a choice.

3. How is the earnings rate of an I Bond determined?

The earnings rate of an I Bond is a combination of two separate rates: a fixed rate of return and a variable semiannual inflation rate. The fixed rate remains the same throughout the life of the I Bond, while the semiannual inflation rate can vary every six months.

The fixed rate of return is announced by the Treasury Department each May and November. The fixed rate of return announced in May of a given year is the same over the entire life of the I Bonds you purchase between May 1 and October 31 of that year. Likewise, the fixed rate of return announced in November of a given year applies to the entire life of I Bonds you purchase between November 1 and April 30 of the following year.

The semiannual inflation rate is also announced each May and November by the Treasury Department. The semiannual inflation rate is based on changes in the Consumer Price Index for all Urban consumers (CPI-U), which is reported by the Bureau of Labor Statistics. The semiannual inflation rate announced in May is a measure of inflation over the preceding October through March; the inflation rate announced in November is a measure of inflation over the preceding April through September.

The semiannual inflation rate is combined with the fixed rate of an I Bond to determine the I Bond's earnings rate for the next six months.

4. When are earnings added to the I Bond?

I Bonds increase in value each month, and interest is compounded semiannually. I Bonds increase in value on the first day of the month. An I Bond's issue date is the month and year when the full issue price is received by an I Bond issuing agent.

5. Can I ever lose money in I Bonds?

No. I Bonds are U.S. Treasury securities backed by the U.S. Government. I Bonds even protect you from the effects of deflation. In the rare event that the CPI-U is negative during a period of deflation and the decline in the CPI-U is greater than the fixed rate, the redemption value of your I Bonds will remain the same until the earnings rate becomes greater than zero.

6. How long will my I Bond earn interest?

I Bonds earn interest for up to 30 years.

7. What are the tax advantages of the I Bond?

Earnings are exempt from state and local income taxes. Federal income taxes can be deferred for up to thirty years, or until redemption or other taxable disposition, whichever comes first.

8. Is there a tax advantage for I Bonds used for college tuition?

Yes. If you qualify, you can exclude all or part of the interest on I Bonds (and on eligible EE bonds) from income as long as the proceeds are used to pay for tuition and fees at eligible post-secondary educational institutions. Details are available in IRS Publication 550, "Investment Income and Expenses."

INVESTING IN AND REDEEMING I BONDS

9. Which denominations of I Bonds are available?

On September 1, 1998, six denominations ($50, $75, $100, $500, $1,000, and $5,000) were made available for purchase through financial institutions across the country. Two additional denominations ($200 and $10,000) were added in May 1999.

10. How much do I Bonds cost?

I Bonds fit all budgets. They are sold at face value in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. This makes it easy to keep track of the growth of your bond's value.

11. Is there a limit on how much I can invest each year in I Bonds?

Yes. You can only buy up to $30,000 worth of I Bonds each calendar year. The purchase limitation for Series I Bonds isn't affected by purchases of Series EE Bonds.

12. Where can I buy I Bonds?

You can order I Bonds at most local financial institutions. You just fill out a simple purchase order, pay for the bond, and your I Bond will be mailed to you within three weeks. I Bonds are also available through employer-sponsored payroll savings plans. Check with your employer to see if I Bonds are available where you work. If not, let them know you're interested!

13. Can I Bonds be purchased as gifts?

I Bonds are great gifts for all occasions. An I Bond can be sent to you so you can present it personally or it can be sent directly to the person receiving the gift. When you buy the I Bond, ask for a free gift certificate. The word "gift" won't appear on the I Bond.

14. Who can own I Bonds?

U.S. citizens, residents, and workers of any age with a valid U.S. social security number can own I Bonds.

15. How can I Bonds be registered?

There are three primary ways to register I Bonds:

• Single ownership: Only the registered owner can cash the I Bond.
  
• Co-ownership: Two individuals' names appear on the I Bond; either person may cash the I Bond without the knowledge or approval of the other. Upon the death of one co-owner, the other becomes the sole owner of the I Bond.
  
• Beneficiary: Only the owner may cash the I Bond during his or her lifetime. The beneficiary automatically becomes the sole owner of the I Bond when the original owner dies.
  The registration on an I Bond can be changed, but there are some restrictions.

16. Where can I Bonds be redeemed?

Most financial institutions serve as paying agents for I Bonds and Series EE Bonds. If they redeem Series EE Bonds, they also redeem I Bonds.

17. When can I cash (redeem) an I Bond if I need the money?

You can cash an I Bond anytime six months after the issue date to get the original investment plus the earnings. However, I Bonds are meant to be longer-term investments. So, if you redeem an I Bond within the first five years, there is a 3-month earnings penalty. For example, if you redeem an I Bond after 18-months, you'll get 15 months of earnings.

18. Can Series EE Bonds be exchanged for I Bonds?

No, Series EE Bonds can't be exchanged for I Bonds. You can cash the EE Bonds and use the proceeds to buy I Bonds; however, the interest earned on the EE Bonds must be reported on your Federal income tax return for the year in which they were cashed.

19. Can I Bonds be exchanged for Series HH Bonds?

No, I Bonds can't be exchanged for Series HH Bonds.

20. How are lost, stolen, or destroyed I Bonds replaced?

The Bureau of the Public Debt is authorized to replace lost, stolen, or destroyed I Bonds. You can file a claim by writing to: Bureau of the Public Debt, Parkersburg, West Virginia 26106-1328. You'll need to complete Form PD F 1048.

Keep records of your I Bond serial numbers, issue dates, and the social security or taxpayer identification numbers in a safe place. This information will help speed up the replacement process. The Savings Bond Wizard is a great way to keep track of your bond inventory.

HONORING GREAT AMERICANS

The I Bond's physical dimensions and the placement of the information will be the same as for Series EE Bonds. However, each I Bond denomination features a prominent American who has contributed to the history of this country; also, the background and colors are new and different from those of Series EE Bonds.

Take a look at the I Bond and see which eight Americans are featured on I Bonds!

22. Which Americans are on the I Bonds?

Eight Americans are honored on the I Bonds, representing the diversity that built this country, made it what it is today, and will take it into the future. Portraits of the following prominent Americans appear on the eight I Bond denominations.

• $50 - Helen Keller - Noted author and advocate for people with disabilities; responsible for Braille becoming the standard for printed communications with the blind.
• $75 - Dr. Hector P. Garcia - Physician; leading advocate for Mexican-American veterans' rights; activist in Latino civil rights movement and founder of the American G.I. Forum.
• $100 - Dr. Martin Luther King, Jr. - Prominent civil rights leader; minister; Nobel Peace Prize recipient.
• $200 - Chief Joseph - Nez Perce Chief; a great Native American leader.
• $500 - General George C. Marshall - U.S. Army Chief of Staff during World War II; Secretary of State; Secretary of Defense; Nobel Peace Prize recipient.
• $1,000 - Albert Einstein - Physicist; author of the Theory of Relativity; Nobel Prize recipient for Physics.
• $5,000 - Marian Anderson - World-renowned vocalist (contralto); first African-American to sing with the Metropolitan Opera.
• $10,000 - Spark Matsunaga - U.S. Senator and Congressman; World War II hero; obtained redress for survivors of World War II internment camps.

FOR MORE INFORMATION ABOUT I BONDS

• The easiest way is to check out our entire I Bond Web site or send us an e-mail message.
• You can also write: Bureau of the Public Debt, Savings Bond Operations Office, Parkersburg, WV 26106-1328.
• To get current rate information on savings bonds, call: 1-800-4US-BOND (1-800-487-2663). You can also get detailed rate information by looking at the United States Savings Bonds/Notes Earnings Report (I Bond earnings rates will be available starting November 1, 1998).
• The Offering Circular (31 CFR 359) and Regulations Governing I Bonds (31 CFR 360) are available via our web site, or you can write to the above Parkersburg, WV address.

This FAQ is maintained by the Bureau of the Public Debt's Savings Bond Operations Office. Keep in mind that these questions may not fit all situations and are only intended as guidelines. Please send any questions or comments to: [email protected].

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