Retirees: 0% Bonds Are Better Than You Think

Key Points:

• Zero-coupon bonds are a great gift for grandparents to help fund a grandchild’s college education.
• Ideal for conservative investors, they offer safe, long-term savings backed by the U.S. government.
• Available through brokerage firms, they mature to full value over time.
• As good as 0% bonds can be, dividend legends can be substantially more rewarding. See the two to buy and hold forever by clicking here now.

Lee and Doug continue their discussion on the benefits of zero coupon bonds, emphasizing how they can be a thoughtful gift, especially from grandparents looking to help with future college expenses. They suggest purchasing bonds that mature when a child is likely to start college, providing a stable and predictable financial resource. The bonds are considered a conservative investment, backed by the full faith and credit of the U.S. government, and are appealing for those concerned about stock market volatility. They also discuss the broader implications of zero coupon bonds, including a hypothetical scenario where the U.S. Treasury could issue only zero coupon bonds to reduce immediate interest payments, though they acknowledge this is unlikely. The conversation underscores the practicality of these bonds for seniors or those nearing retirement who want to ensure a future financial safety net.

Transcript:

Is there a target group of people you would give this to as a gift?

Well, yeah.

I mean, for grandparents, let’s say you want to help your son and daughter put your grandchild through college.

You could go in, let’s say, well, for instance, my grandchild will be born in November.

Okay, so that’s 2024.

They will probably start school in, let’s see, 18 years from now would be 2042.

So you could go in and buy, let’s say you wanted to help with college costs in 2042.

You could buy 2042 bonds, 2043, 2044, 2045, if they have a registered year 2046, and you can have the bonds mature then for your son or daughter to help put a child through school.

So it’s not a bad gift for a grandparent.

And it’s not a bad idea for young parents worried about the stock market or worried about how the stock market will be in 18, 19, 20 years from now.

Because they are backed by the full faith and credit of the U.S. government.

And as we know, if they run out of money, they’ll just print more.

Yeah.

For those of us who are watching right now, where do I buy one of these?

Well, typically, you can go online at your brokerage firm and see if they carry them, you know, in their do-it-yourself fashion.

If not, if you have a stock broker at any good firm, they can go in and they can help you find bonds that’ll suit your need, but they’re constantly out there.

And see, the government likes them because they don’t have to pay any interest on them.

They ultimately have to pay the full layer of the accrual, but they don’t have to pay any interest on them.

So I think it’s, again, not like we were talking about at one point in the past, unlike popular investments that people look for for big gains to help fuel your college costs for your kids.

What if the stock market crashes right when your kids are going to school?

Unless you took it out, you could have 20, 30, 40% of that money go away.

And even if it’s in a 529, you know, which is a qualified plan that’ll help keep that money protected from taxes, it could still suffer stock market losses.

So for those that are a little more conservative, it’s not a bad idea.

You know, if I were the Treasury Department, I would say you can only get sovereign paper from the United States if it is zero coupon bonds.

Because what it would mean is we would stop paying interest for some number of years, and maybe we could catch our wind.

I don’t know.

It’s a suggestion. I know they won’t take it, but I’m just throwing it out there.

Well, if they could convince people to do that, it would be a great idea.

But I don’t think that’ll be forthcoming.

But I do think they’re a great idea.

And for seniors or for people moving into the senior bracket or worried about having enough income to live on, they’re a good way to go out there and put some money that, you know, will come due 10, 15 years from now.