Thursday, April 12, 2012

Bye, bye bonds

They used to be available at any bank and when they reached maturity they could be redeemed instantly at any bank. Then things changed. Redemption took two weeks or more and now they are gone.

"Bonding Experience Is Lost as a Traditional Gift Disappears"

Fans Miss Paper U.S. Savings Bonds, Struggle With Online Ones; 'Family Thing'


Robin Sidel

April 11th, 2012

The New York Times

Pam Root always bought U.S. savings bonds to commemorate the birth of her grandchildren. But the newest addition to her family will get cold, hard cash.

When her four other grandchildren were born, Ms. Root walked into her local bank to buy the bonds. Starting this year, however, the only way to buy savings bonds is directly from the Treasury Department—online.

"I don't feel comfortable putting my grandchild's Social Security number online," says the 58-year-old receptionist from Harwinton, Conn., whose grandson Matthew arrived last month.

Across the U.S., grandparents and other fans of traditional savings bonds are mourning their loss. A mainstay of American finance since the 1930s, the paper bonds have been eliminated as a government cost-saving measure.

The bonds strike an emotional chord with generations of Americans who have bought and received them for birthdays, weddings, graduations and bar mitzvahs.

"It's a family thing," says New Yorker Robyn Miller, 53 years old, whose two teenage sons have received thousands of dollars worth of paper savings bonds over the years from grandparents, cousins and family friends. She stashes them in a safe-deposit box.

For generations, the government urged Americans to buy savings bonds as part of their patriotic duty. Companies rewarded productive workers with them and encouraged employees to buy them through automatic payroll deductions. They cost as little as $25 and increase in value slowly until they mature in as many as 30 years.

Hollywood jumped on the bond bandwagon, too. In 1966, "Bewitched" actress Elizabeth Montgomery stood in front of a Christmas tree and told television viewers that the bonds were "guaranteed to please." Bob Hope, John Wayne and Bugs Bunny pitched savings bonds in TV ads.

But sales of savings bonds plummeted as Americans gravitated to other financial instruments like mutual funds and college-savings accounts. The government sold just $1.5 billion worth of paper savings bonds last year, down 86% from $11.3 billion in 2003.

"It's time for us to take a 1935 model and make it a 21st-century investment tool," Public Debt Commissioner Van Zeck said when the government announced the all-electronic move last summer. The change is expected to save $70 million in processing costs over the next five years. Existing paper bonds can still be redeemed at banks.

The switch doesn't sit well with many savings-bond buyers, who say an electronic gift is a poor replacement for a paper bond that can be tucked away for the future. Many savings-bond fans prefer the certainty of a savings bond to a stock certificate whose underlying worth can fluctuate widely.

They also say U.S. savings bonds provide children with an important lesson about saving for the future.

"The kids nowadays, they have too many toys and too many clothes," says Sinmin Wu, 81 years old, of San Diego, who has bought paper bonds for his daughter's two young sons.

One of the biggest drawbacks to the electronic system is that it is difficult to navigate. Those hurdles become even bigger for grandparents who aren't computer savvy or lack easy access to the Internet.

To buy savings bonds online, buyers first have to set up an account on the Treasury's website, which requires an email address, Social Security number and bank-account number. Once purchased, the bond is placed in the buyer's electronic account.

The site doesn't accept credit cards. Money to purchase the bond comes out of the buyer's bank account.

"It's not an easy site to use. We will admit that," says Mckayla Braden, a spokeswoman for the Bureau of the Public Debt, which is part of the Treasury Department.

She says the agency has been deluged by angry consumers since the January change, receiving some 18,000 calls a week, up from 1,000 before the change. One woman who thought she was buying paper bonds online was so upset that the department agreed to refund her $2,000 purchase.

Even some younger consumers are flummoxed.

"I was uncomfortable with it. If I could use a credit card, maybe I'd buy one," says John Hedges, a 48-year-old human-resources manager who lives in Glastonbury, Conn. He poked around on the government website after learning that the bonds weren't available at his bank.

The new procedure is equally exasperating for bankers, who often have to break the unpleasant news to customers who still expect to buy savings bonds at a branch.

Taylor Thompson, a financial consultant at Pioneer Investment Services in Rapid City, S.D., says he tries to help his clients navigate the online process. "By the time we get halfway through it, they are so confused and frustrated that it just ends up deterring them," he says.

Two of his clients are Sharon and Bill Costner, parents of actor Kevin Costner. The couple recently spent hours with Mr. Thompson trying to figure out how to register for an account so they could track two $5,000 bonds that they bought for themselves last year.

"We will take our $10,000 out as soon as we can—one way or another—and we no longer intend to buy them," says Mrs. Costner, 83 years old.

It is even a lot of work to give an electronic savings bond as a gift because the recipient must also set up an account. The sender can't zap the gift to the recipient without knowing the recipient's full name, Social Security number and Treasury account number.

"The element of surprise is completely gone," says Doug Schoen, a 59-year-old political analyst in New York who recently bought a savings bond online for a colleague's new baby.

Barbara Petrick, a retired high-school teacher who lives in Jersey City, N.J., usually presents a $25 savings bond as a history prize to a graduating senior at William L. Dickinson High School where she used to work. She already is resigned to replacing this spring's savings bond with a gift certificate.

"I'm disappointed," says Mrs. Petrick, who describes herself as "not that great with a computer."

Mr. Wu says he is willing to give the electronic process a try in order to buy savings bonds for his new twin granddaughters.

Lin-Hua Wu, his daughter and mother of the baby girls, is skeptical.

"He'll never do it," she says. "He won't try to buy anything on Amazon."

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