T-bond limits deters savers

Just when we’re all agreeing that Americans need to save more, the U.S. Treasury has figured out a way to stop people from buying too many U.S. Savings Bonds.

I’m not sure why anyone would imagine that small savers could save too much money in the sleepy but safe savings bonds program.

But starting Jan. 1, the thrifty will be safe from themselves.

Get ready for a drastic drop. As of next year, a saver will be able to set aside up to $5,000 each calendar year for the Series I bonds and up to $5,000 each calendar year for Series EE bonds.

Right now, a saver could set aside up to $30,000 each calendar year in Series I bonds and another $30,000 in Series EE bonds.

Thanks to quirky fine print, savers can reach beyond these limits.

Next year, it will be possible to set aside a total of $20,000 each year in savings bonds — if you buy $10,000 in paper and another $10,000 in an online Treasury Direct account. Again, you couldn’t buy $20,000 in I Bonds alone. See www.treasurydirect.gov.

By contrast, under the old rules the individual could set aside $60,000 in paper bonds and save another $60,000 by using online accounts.

The limit is applied based on the Social Security number or taxpayer identification number of the first person named on the account. So a second person named on those bonds may buy additional securities to reach his or her own limit.

No, this change isn’t going to hurt grandparents who buy a couple of bonds each year for each grandchild.

But if you are saving $150 a week through a payroll plan and putting $7,800 a year toward I Bonds, well, you’re going to need to adjust your contributions for 2008. In recent years, Series I bonds have tended to be more popular than Series EE bonds.

An I bond bought from November through April 2008 will earn 4.28 percent for the next six months. The rate is to adjust in the future based on inflation.

An EE Bond bought during the same period will have a fixed annual rate of 3 percent for the next 20 years, and then another rate could be set for the last 10 years.

Obviously, savers have other options, too.

Stephen Meyerhardt, a spokesman for the Bureau of the Public Debt, said that later next year, possibly by June, the Treasury’s online system will allow small savers to set aside as little as $100 to buy U.S. Treasury bills. The current minimum is $1,000.

Even so, I don’t exactly view next year’s new savings bonds limit as a friendly feature.

“Would you consider a person who buys a lot to be one of your best customers?” asked Daniel Pederson, a savings bond expert in Michigan.

So why hurt your best customers?

His guess is that the strategy is to promote the sale of Treasury securities, instead of savings bonds.

I don’t doubt it. But it’s a silly sideshow — and my guess is that the government wants out of the savings bond business. If it keeps at it, it will do just that.

X Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.