Even when the TSP became available to federal employees in the 1980s, U.S. Savings Bonds were still a good investment for employees. Image: Jonathan Weiss/Shutterstock.com
In 1985, I started my career with the federal government. At that time, there was no Thrift Savings Plan (TSP). So how did federal employees save for their retirement? There was a CSRS Annuity. The FERS Annuity became effective in January 1984. But FERS employees transitioned during 1987.
For both FERS and CSRS employees there was no ability to invest in any tax deferred vehicle other than the United States Savings Bond Program. The program was promoted to employees each year to purchase savings bonds through their human resource (HR) payroll program. I started buying 50-dollar savings bonds, then 100-dollar savings bonds and then I increased my purchase to 1,000-dollar savings bonds. The larger bonds would minimize the number of paper savings bonds that I had accumulated.
Even when, the TSP became available to federal employees, the U.S. Savings Bonds were still a good investment for employees. The federal employees who maxed out their employee contributions to the TSP would look for additional tax deferred investing. Also, federal employees who wanted to save for a cash emergency such as a Federal Furlough, the U.S. Savings Bonds provided an excellent way to save for that rainy day emergency. Cashing in savings bonds can be done fast and easy.
The federal government ended the U.S. Savings Bond program because, the United States Treasury wanted to have all U.S. Savings Bonds purchased online through the U.S. Treasury Direct website. Personally, I believe that the program could have continued as a payroll deduction very similar to how the TSP is transacted as a HR payroll deduction.
Today, savings bonds that can be purchased are EE Bonds at a rate of 2.70 percent and I Bonds at a rate of 3.98 percent. There are advantages to each of these two types of bonds. Also, Treasury Bills can be purchased at various term dates and the interest rates range from 4.00 percent to 4.25 percent.
The best benefit of U.S. Securities is that they are exempt from state income taxes and the federal taxes are deferred until they either reach their maturity date for Treasury Bills or when EE or I Savings Bonds are cashed in by the bond holder.
I continue to purchase Treasury Bills in retirement. They are easy to acquire and the record keeping is easy to maintain and cashing them in is a simple process. Once Treasury Bills mature, they automatically are deposited back into your checking account. There is no chance of forgetting them.
I purchased many savings bonds during my federal career.
The EE bonds that I purchased in 1995 have reached maturity after 30 years because they no longer earn interest income. Cashing them in 2025, has been a perfect time to add to my retirement income stream and to help me with making large purchases or taking an expensive vacation.
Abraham Grungold is a retired federal employee with 36 years of federal service – including with the USPS Inspector General, the VA Inspector General, the US Dept of Justice, and the US Dept of Labor. Through his company AG Financial Services he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 80 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.
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