If you want a savings bond for 10 years, here are your options.
Table of Contents
This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.
Government Savings Bonds
If you want an official government savings bond, Treasury Direct I-Bonds will probably be your best bet. When you buy a savings bond, you have to hold it for at least one year and can hold it for up to 30 years. I-Bonds have a variable interest rate based on the current rate of inflation.
The Treasury doesn’t sell savings bonds in time increments. Instead, you buy a savings bond and decide how long you want to keep it later.
You can sell it anytime after the one-year mark. So while you can’t specifically buy a ten-year savings bond, you can buy a savings bond and hold it for ten years. What you don’t want to do is hold a savings bond for more than 30 years because after 30 years, the taxes are due and you stop earning interest.
Why not Series EE savings bonds?
Currently, they’re not worth it if you’re only going to hold for 10 years. EE-Bonds have a fixed interest rate for the life of the bond.
The current interest rate is a pitiful 0.10%. The main benefit of EE-bonds is that they double in value after 20 years which is equivalent to a 3.5% interest rate. But if you only hold for 10 years, you only get the 0.10% per year.
10-Year Treasury Notes
If you want an investment that lasts exactly 10 years, you may want to consider treasury notes. You can buy a 10-year note with a fixed interest rate that pays over the life of the note. After 10 years, you get your initial investment back.
One tax benefit to these notes is that states can’t impose income tax on interest payments by the federal government, so you only have to pay federal taxes.
TIPS stands for Treasury Inflation-Protected Securities. These are government investments that work similarly to notes.
The main difference is that in addition to getting interest payments, the value of the bond changes with inflation. So if you buy a $100 tip and inflation in the first year is 5%, it’s worth $105 at the end of the year. Your interest payments will also go up because they’re based on the current value of the TIP.
Like notes, you can choose multiple length TIPS including 10 years.
Most Bank CDs only go up to five years, but there are banks that sell CDs with terms as long as 10 years or 120 months. If your bank doesn’t offer 10 year CDs, another option is to get a 5 year CD and renew it once.
If you’re not familiar with CDs, they’re like a government note or savings bond. You lock your money in for the length of the CD and get it back at the end. Along the way, you can choose to add the interest payments to the value of the CD or have them deposited in your checking account.
Another option for a 10 year investment is to buy a bond fund in your brokerage account.
Most bond funds hold a certain length of bond but don’t have a fixed end date. For example, a bond fund that holds 1-10 year bonds will continuously buy new 10-year bonds, hold them until they’re down to one year, then sell them to buy new bonds. You get interest payments until you sell the bond fund.
If you know you want to take out your money in exactly ten years, there are a small number of bond funds that do this. For example, iShares has bond funds with bonds maturing in certain years. So in 2022, you’d buy the 2032 fund. They offer separate funds with both government and corporate bonds.
There are many other alternative investments you can consider like the Donut App. If you look at other investments, you’re getting something that doesn’t have a fixed end date like a Treasury Note or that may lose value unlike a Savings Bond.
Alternative investments might be good as a gift if your goal is to teach someone about investing. If you’re investing to pay for something in 10 years, you might want to stick with savings bonds.
As always, talk to your investment advisor for help figuring out which investments are best for your situation.