investing

Tough to buy Series I bonds for IRA

Dear Dr. Don,
Is there a way to use TreasuryDirect to purchase Series I savings bonds for an IRA? -- Spencer Savings


Dear Spencer,
If there is, I haven't figured it out. IRA assets are held in trust or custody accounts. That means that the Series I savings bonds would have to reside in a trust-like bank account. With the electronic purchases through TreasuryDirect, your account with the Treasury is not set up to be an IRA account.

I sent an e-mail to the nice people at TreasuryDirect to confirm my hunch and they made it official. You can't buy savings bonds electronically through Treasury Direct for an IRA account. That's because you cannot establish a TreasuryDirect account in the name of an IRA or register electronic I or EE bonds in an IRA registration. You should be able to do this with paper securities, but it gets a little complicated. Here's how Barbara Beckett, a customer service specialist at TreasuryDirect, explained it to me:

If you have an IRA agreement with an organization, such as a bank or investment company, that would be willing to be designated as trustee or custodian of the IRA in the registration of the savings bonds, then it may be possible to purchase paper Series I and EE bonds for the IRA.

The registration of the bonds would need to include the name of the trustee/custodian, the name of the owner of the IRA and the date of the IRA agreement, for example:

First National Bank Trustee U/A John Smith Roth IRA dated 4-11-02

The trustee/custodian for the IRA would need to complete the purchase order form for the bonds and submit the form and check for the purchase price of the bonds to a Federal Reserve Bank. The bonds should be mailed back to the organization that is serving as trustee/custodian for the IRA.

Finding a financial institution that is willing to act as trustee/custodian for these investments in an IRA account isn't an easy thing to do. The annual account fees and expenses related to the account may make it an unattractive approach to retirement savings.

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