Financial Planning for Generation X & Y Women
Notice: Because of a database server upgrade, this site may be partially non-functional from August 21st to August 22nd. No data will be lost. We apologize for any inconvenience.
Under slight reconstruction until 5PM CST today... Please excuse the dust!
Resource Center
Expert Q&A Archive Teleconference Call Archive Online Resources Federal Reserve Board Resources FPA Perspectives
Error — no()

Expert Q&A Archive

Is buying savings bonds a good investment for retirement?
Is buying savings bonds a good investment for retirement?
Kris Freeberg:
expert info »
Yes, it is an appropriate piece of a diversified portfolio. It's also possible to participate in the safety of bonds without sacrificing liquidity by investing in bond mutual funds.
Delores Lenzy - Jones, CPA, CIA:
expert info »
This is a pretty open-ended question. In general, yes. However, it's important to understand your investment strategies. How much money do you hope to have at retirement?
Michael A. Masiello:
expert info »
Possibly, but doubtful. Based on age, risk tolerance, etc, objectives will determine a portfolio strategy. Normally savings bonds pay a low rate of return and may not make you enough return. Good luck, thanks, Mike.
Alyssa Rakovich:
expert info »
When looking at investments for retirement you must take into account your risk tolerance and your time horizon. The rule of 72 [Wi$eUp - Chapter 5
"Saving Basics"] tells you how long it takes money to double. Divide the rate of return into 72 – i.e. 1% into 72 takes 72 years for money to double. Some folks can't wait that long, however there are risks associated with every investment, e.g. risk of not keeping up with inflation (buying power risk), interest rate (risk when investing in fixed income), and principle (risk when investing in equities Working with an investment professional, you can map out the best course of action to get you to retirement within parameters that make you feel comfortable.
Gary Silverman, CFP®:
expert info »
It's always difficult to answer a question like this, because there are so many variables that what makes one type of investment good for a person can make it bad for another. That said, I know of no financial advisor, planner, or manager that considers savings bonds a good investment for retirement. There are two aspects to them that are favorable: 1) People tend to forget about them, so they don't get spent on a new TV or vacation, and 2) they're better than nothing.
Rebecca Schreiber CFP®:
expert info »
Good question. If you're absolutely terrified of investing in the stock market then purchase savings bonds. You will earn more with bonds than with a savings account at your bank. You can purchase the bonds for as little as $25 and the US Government will do the investing for you.

However if you are more than ten years from retirement look into investing in something designed for more growth. If your stomach can handle a little risk, you can earn twice as much through investing in an index fund like the S&P 500 and earn 10% instead of 5% from your bonds. If savings bonds are the riskiest plan you are comfortable with then go with it but at least take the time to learn about the other investments out there that can earn you much more than a savings bond. Try or for their beginner investment guides. Best wishes.
Connie K. Marmet:
expert info »
If you have a payroll deduction to purchase bonds, it's a good way to be sure you save. That said, if you have a 401(k) with an employer match and you are not making a contribution that fully utilizes the match, you would be ahead to contribute more to the 401(k) (or governmental equivalent).

From a yield perspective, you would need to compare the rate of interest paid on savings bonds versus other investment options. Long term interest rates are not that different from intermediate terms ones, so be cautious in choosing which series of bond you invest in.
Editor's Note:
Wi$eUp - Chapter 5 Saving Basics covers the many types of investing choices as well as The Impact of the Time Value of Money. You can also learn more about index investing on the website of The Motley Fool at: The Motley Fool website also has information on the different types of bonds, including a definition of “liquidity” which was mention in Kris Freeberg’s answer under “Buying Bonds at: