Dear Dr. Don,

What will happen if I buy more than $5,000 in Series I savings bonds in a year?

— Faron Reasonable

Dear Faron,

It depends. The government put an annual limit on savings bond purchases effective Jan. 1, 2008, but it distinguishes between bonds purchased as physical securities (paper bonds) and bonds held electronically using TreasuryDirect.

You can buy $5,000 in paper Series I bonds and another $5,000 in electronic form. Because Series I savings bonds are purchased at face value, you can buy $10,000 worth per calendar year.

After purchase, you can later convert your paper bonds to electronic form. Because the purchase limit applies to the first co-owner, if you own the bonds with a co-owner, you can switch the order of owners and pick up another $10,000 worth.

Also, because ownership is tracked by Social Security or tax identification number, you shouldn’t be able to buy more than the annual purchase limits. The government doesn’t even address this eventuality on its Web page “FAQs Concerning the Change in the Annual Purchase Limit for Savings Bonds.”

If, for some reason, you find yourself in that situation, you should contact the Treasury Department about correcting the error.

Don’t forget that you can buy Treasury inflation-protected securities, or TIPS, in a TreasuryDirect account, too. While there are important differences between TIPS and Series I savings bonds, TIPS are a way to invest in inflation-protected securities without the low purchase limits of the savings bonds.

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