Tuesday, October 25, 2011

Best Savings Account in the Country ... 4.6%

This is
G&G Associates
Tax & Financial Consulting Services
e-Newsletter


The Best Savings Account in the Country
(It's Paying 4.6%)

Karibu (Welcome) G&G Readers,

For some reasons there are many G&G readers who still have their money sitting in US bank savings accounts losing money or have a hefty portion of their retirement still residing in US based investments.

Well … I've learned you can take a horse to the water but you can't make him/her drink it. So, as an alternative I'm going to give you a freebie this week. This is for those who still like savings accounts … by far your banker surely will not tell you about this type of investment vehicle.

At least if you are going to place your money in a savings account … at least get yourself the highest interest out there. Here goes ....

G&G readers … this country's best savings account is with the federal government.

The government doesn't market this product. And bankers and brokers won't tell you about it because it doesn't generate commissions. Few people know this vehicle even exists.

Quote: "The more you learn the more you earn, the less you know the more you owe."
S. Botkin

I'm hesitant to recommend any government-backed or government-created financial vehicle. The government bungles almost everything it touches. But I assure you, this account is a sound idea. It's currently paying 4.6% per year in interest. That's quadruple what you'd get in a savings account with your local bank.

And it's a near-perfect spot for your savings. Let me explain…

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The Treasury calls this product "Series I Savings Bonds."

This is a government-backed savings account. You cannot lose your principal. And your interest rate adjusts for inflation. This is one of the safest investments in existence.

The interest income is also exempt from state and local taxes. You don't have to pay any fees to get started. Unlike regular government bonds that fluctuate in price, you cannot lose money in Series I Savings Bonds, even if the inflation rate turns negative. And, of course, it pays that astonishing 4.6%.

The government uses two factors to determine the interest rate on Series I Savings Bonds. One is a fixed interest rate that they lock in at the time of purchase. Short-term official interest rates (set by the government) determine this rate. Right now, official interest rates are at zero percent.

The second factor they use is the inflation rate. Every May 1 and November 1, the government calculates the inflation rate by using the Consumer Price Index (CPI). Then they add this rate to your fixed rate of interest for the following six months.

The CPI is currently running at 2.3% – that's a semiannual (six-month) rate. You multiply it by two to get your annual yield of 4.6%. For more info on how they calculate the CPI click below:

http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm

So, for Series I Savings Bonds issued from May 1 until October 31, the fixed rate is zero percent and the variable rate is 4.6%. Again, that's more than four times what you can get in a savings account at your local bank.

You buy Series I Savings Bonds from the Treasury.

> First … go to Treasurydirect.gov and open an account.

> Next...you'll need to link it to your bank account. Three days later, you'll receive your login information in the mail.

> Finally, you can now buy any Series I Savings Bonds – or any other government security – free of any commissions, holding charges, or transaction costs. Yes … no fees or commissions!

There is some minor "fine print"… The minimum investment is $25. The maximum is $5,000 per year, per Social Security number. Did you catch that per social security number… not per household.

The biggest drawback is that you can't redeem your money in less than 12 months. And you can't hold it for longer than 30 years. If you redeem your money in less than five years, the government will charge you a penalty of three months of interest. (Even so, you'd come out ahead of your local savings account.)

If you are still investing your savings in US banks, I suggest you at least choose this alternative and put as much of your money in this type of an account the government allows.

As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.

If you need a one-on-one consultation to learn how to implement these investments or any other on the GGIS portfolio, feel free to contact me to setup an appointment.

If you missed any past G&G newsletters, click on link below for the archive:
http://ezinedirector.com/admin/publisher/archive/public/?fuseaction=a&e=7944575E0843077440

Metta (Wishing You the Best)

Asar Maa Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
757-251-0174 office
866-361-3872 toll free fax
www.gngassociates.net

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LEGAL NOTICE: This work is based on what I've learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice.

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