Personal Finance Blog By MoneyRates - November 2008

The Treasury Department announced earlier this month the new rates for savings bonds. Purchasers of the Series I savings bond will earn a fixed rate of 0.70% and an inflation-adjusted rate of 4.92%. The inflation-adjustment is reset every six months. New buyers of the Series EE bonds will earn a rate of 1.30, while current holders of the Series EE bonds will continue to earn their stated rate at the time of purchase. The Treasury Department resets the rates on the Series EE bonds every six months. Millions of Americans have inherited or been gifted savings bonds which no longer are earning interest including the following issues:

Series E Savings Bonds issued from May 1941 - November 1978

Series H Savings Bonds issued from June 1952 - November 1978

Series HH Savings Bonds issued from January 1980 - November 1988

Savings Notes issued from May 1967 - November 1970

All Series A, Series B, Series C, Series D, Series F, Series G, Series J, Series K Savings Bonds have stopped earning interest

The easisest way to redeem old savings bonds is to take them to a bank where you have an account. As long as you bring proper identification you should be able to cash them at their current value.

Money-Rates.com is now posting Twitter updates at Twitter.com for people interested in keeping track of the latest up-to-the-minute bank deals. The easiest way to keep track of the updates is to open an account at Twitter - a process that takes less than five minutes.

The quick answer to the above answer is NO or at least almost certainly NO. Parents looking for a break on college tuition, now that the economy is an a recession and inflation is tame, are unlikely to see it based on the historical increase in the index of college inflation:

College Inflation (CB) vs General Inflation (CPI)

2007 6.3% CB vs 2.29% CPI

2006 5.9% CB vs 3.23% CPI

2005 5.94% CB vs 3.39% CPI

2004 5.97% CB vs 2.66% CPI

2003 5.99% CB vs 2.28% CPI

2002 5.80% CB vs 1.58% CPI

2001 5.48% CB vs 2.85% CPI

2000 5.25% CB vs 3.36% CPI

1999 4.56% CB vs 2.21% CPI

1998 5.24% CB vs 1.56% CPI

1997 5.16% CB vs 2.29% CPI

1996 5.05% CB vs 2.95% CPI

1995 5.32% CB vs 2.76% CPI

1994 5.44% CB vs 2.77% CPI

1993 5.99% CB vs 2.78% CPI

1992 5.79% CB vs 3.16% CPI

1991 7.61% CB vs 4.45% CPI

1990 7.83% CB vs 4.81% CPI

1989 8.61% CB vs 4.99% CPI

1988 7.89% CB vs 4.16% CPI

1987 7.39% CB vs 3.90% CPI

1986 8.02% CB vs 1.61% CPI

1985 8.15% CB vs 3.55% CPI

1984 8.03% CB vs 4.14% CPI

1983 9.78% CB vs 2.44% CPI

1982 14.35% CB vs 6.48% CPI

1981 13.95% CB vs 10.73% CPI

1980 12.00% CB vs 13.22% CPI

Through good times and bad times, college tuition increases at a faster pace than inflation and wages. Parents who have lost a great deal of value in their children's 529 plans are in a worse position than ever. That's because even the most optimistic stock market forecasts are not suggesting that the Dow Jones Industrial Average will cross the 14,000 barrier in the next few years. At the same (as the graph below shows) college tuition should be expected to continue to increase at an even faster rate than CPI.

Source: Finaid.org

Parents looking for a different solution to college savings plans can explore the various options listed on the Money-Rates.com College Savings Plan page.

The Treasury Department has released the new semi-annual rate adjustments on their Series I inflation bonds and the fixed-rate Series EE bonds. The Series I bond, which pays a fixed component and an inflation-indexed component, is set to pay an earnings rate of 5.64% for the next six months and purchasers of the Series EE bonds for the next 6 months will be paid an earnings rate of 1.30%. Savings bonds pay interest for 30 years from the time of purchase and can be cashed in without penalty after five years. New information for current savings bond holders or savers considering buying a savings bond is listed below:

Treasury Department Press Release November 3, 2008:

The Bureau of the Public Debt today announced an earnings rate of 5.64% for Series I Savings Bonds, and a fixed rate of 1.30% for Series EE bonds, issued from November 2008 through April 2009. Earnings rates for I bonds and fixed rates for EE bonds are set each May 1 and November 1. Interest accrues monthly and compounds semiannually. Bonds held less than five years are subject to a three-month interest penalty. Both series have an interest-bearing life of 30 years; the EE bond fixed rate applies to a bond’s 20-year original maturity.

I Bond Earnings Rate 5.64%, Fixed Rate 0.70%

The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 5.64% earnings rate for I bonds bought from November 2008 through April 2009 will apply for their first six months after issue. The earnings rate combines a 0.70% fixed rate of return with the 4.92% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The fixed rate applies for the 30-year life of I bonds purchased during this six-month period. The CPI-U increased from 213.528 to 218.783 from March through September 2008, a six-month increase of 2.46%.

Series EE Bonds Issued From May 1997 Through April 2005

Series EE bonds issued from May 1997 through April 2005 continue to earn market-based interest rates set at 90% of the average 5-year Treasury securities yields for the preceding six months. The new interest rate for these bonds, effective as the bonds enter semiannual interest periods from November 2008 through April 2009, is 2.80%. Market-based rates are announced effective each May 1 and November 1. A 3-month interest penalty applies to bonds redeemed before being held five years.

Series EE Bonds Issued Before May 1997

Series EE bonds issued before May 1997 earn various rates for semiannual earnings periods beginning between November 2008 and April 2009, depending on dates of issue.

Matured Series E Savings Bonds And Savings Notes

Series E savings bonds continue to reach final maturity and stop earning interest. Bonds issued from May 1941 through November 1978 no longer earn interest. All U.S. Savings Notes (Freedom Shares), which were issued from May 1967 through October 1970, have also stopped earning interest. Series E Bonds with issue dates from December 1978 through April 1979 will reach final maturity during the next six months.

More Information

Earnings rates and actual yields for Series I and EE bonds can be found in Earnings Reports for the respective series on Public Debt's website, http://www.treasurydirect.gov/. The website also contains information and instructions for opening an on-line account to purchase electronic I and EE bonds, as well as Treasury marketable securities. Account holders can purchase, manage, and redeem electronic savings bonds over the Internet 24 hours a day, seven days a week.

Detailed information about all Treasury securities, including savings bonds and marketable Treasury bills, notes, bonds and TIPS (Treasury Inflation Protected Securities), is available through http://www.treasurydirect.gov/.

Source: Savingsbonds.gov

As the above public service announcement makes perfectly clear EDIE is an online tool developed by the FDIC to assist with questions regarding FDIC insurance on deposit accounts and the myriad of ownership classifications. Depositors can run through an online simulation of their bank deposits and receive a report which details insurance coverage. With the maximum insurance amount TEMPORARILY increased from $100,000 to $250,000 the usefulness of this FDIC tool is greater than ever. With less fanfare than the increase in the deposit limits, the FDIC also changed some of the rule regarding Revocable Trust accounts. Again the EDIE online tool can simulate insurance coverage for depositors if used correctly.