|
TIPS |
I-Bonds |
| Type of Investment |
Marketable--can be bought and sold in the secondary securities market |
Non-marketable - cannot be bought or sold in secondary securities market. Registered in names of individuals or, for paper bonds only, their fiduciary estates. |
| How to buy |
At auction through TreasuryDirect, Legacy Treasury Direct, or through banks, brokers, and dealers. Starting in January 2007, 20-year TIPS are no longer available in Legacy Treasury Direct, but are available in TreasuryDirect. |
Electronic: Anytime online from TreasuryDirect. Paper: most banks, credit unions, or savings institutions. |
| Purchase Limits |
Auction: Non-competitive bidding:up to $5 million; Competitive bidding: up to 35% of offering amount |
Electronic: $5,000 per Social Security number per calendar year. Paper: $5,000 per Social Security number per calendar year. |
| Par Amount/Face Amount |
Minimum purchase is $100. Increments of $100. |
Electronic: purchased in amounts $25 or more, to the penny; Paper: Offered in 8 denominations ($50, $75, $100, $200, $500, $1,000, and $5,000). |
| Inflation Indexing |
Inflation adjustments measured by CPI-U published monthly |
Semiannual inflation rate (based on CPI-U changes) announced in May and November. |
| Discounts/ Face Amount |
Price and interest determined at auction. |
Electronic I Bonds - purchased in amounts of $25 or more, to the penny. Paper bonds issued at face amount (A $100 I-Bond costs $100.) |
| Earnings Rates |
Principal increases/decreases with inflation/deflation. Coupons calculated based upon adjusted principal. Fixed coupon rate. |
Earnings rate is a combination of the fixed rate of return, set at the time of purchase, and a variable semiannual inflation rate. |
| Coupons/ Interest |
Semiannual interest payments at the coupon rate set at auction. Inflation-adjusted principal is used to calculate the coupon amount |
Interest accrues over the life of the bond and is paid upon redemption |
| Tax Issues |
Semiannual interest payments and inflation adjustments that increase the principal are subject to federal tax in the year that they occur, but are exempt from state and local income taxes. |
Tax reporting of interest can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first. Interest is subject to federal income tax, but exempt from state and local income taxes. Interest can also be claimed annually. |
| Life Span |
TIPS are issued in terms of 5, 10, and 20 years. |
Earn interest for up to 30 years. |
| Disposal before maturity |
Can be sold prior to maturity in the secondary market. |
Redeemable after 12 months with three months interest penalty. No penalty after 5 years. |
