Tuesday, July 23, 2019

Navigating the TreasuryDirect® Maze

In a previous post, The Best Inflation Protection You Never Heard Of, I wrote about U.S Series I Savings Bonds. Like Treasury Inflation-Protected Securities (TIPS), I Bond returns compensate for inflation, as measured by the CPI-I Index.

I like Series I Bonds but the TreasuryDirect® website, not so much.

The two types of bonds (I Bonds and TIPS) are otherwise significantly different. I Bonds have some unique features as I previously explained, but they also have significant maximum purchase restrictions that make them cumbersome for wealthy retirees to accumulate.

Those maximum purchase restrictions were one of two issues raised by readers of that post, the other being difficulty in navigating the TreasuryDirect® website to purchase the bonds.

Individuals can purchase up to $10,000 of I Bonds per social security number per (calendar) year, which means a couple can purchase $20,000 annually. A single, retired friend complained that it would take decades to buy enough I Bonds at $10,000 per year to fill his bond portfolio. I suppose I can somewhat sympathize with that "problem" except that I know a lot of people who would love to have it.

I, too, need to own TIPS in addition to the I Bonds I purchase but I don't think of my inability to buy as many I Bonds as I'd like as a reason not to purchase any. Other than the maximum purchase limitation, they have some very attractive features.

TreasuryDirect® e-commerce capabilities could use some work. I just spent two weeks working with a couple of well-educated clients who struggled mightily but were ultimately successful in purchasing I Bonds for both spouses. I will offer some tips that might help you navigate the TreasuryDirect.gov website (and therein lies the first tip: don't go to TreasuryDirect.com or Treasury.gov).

The first step to purchase I Bonds at TreasuryDirect® will be to open an account for yourself and one for your spouse if you are married. You can submit your application(s) online by clicking here and then click the "Go" button. But, there is some prep work you will need to complete first.

For each account that you will open at TreasuryDirect® you will be required to submit a TreasuryDirect® Account Authorization Form, FS Form 5444, and snail-mail those completed forms to the Treasury Retail Securities Service address on the form. The form requires a bank's signature guarantee or a brokerage's signature guarantee or Medallion Guarantee. Certification by a notary isn't acceptable. Do not fill out the form until you are in the presence of the guarantor.

You will need a source of funds to purchase the bonds, of course, and you have two options. Typically you will want to purchase bonds using an account at a bank that accepts Automated Clearing House debits and credits. (There is a second way using a "Zero-Percent Bond" to make payroll purchases or a recurring bank debit.) You will provide your banking information when you create the TreasuryDirect® account, so have check(s) available to provide the routing and account numbers.

One of the clients I helped was notified that his account application "needed further security checks." About a week later, he was informed that his application had been accepted, though he was unable to find out why additional checks had been necessary.

You may also need to move funds into the bank account before the bond purchase. If you need to sell stocks or funds, for example, to purchase I Bonds, then be aware that it may take a few days for the brokerage sale to clear and another few days to transfer the sale proceeds to the bank account. There are sometimes ways to link bank accounts and brokerage accounts to make this work faster in subsequent years.

As I pointed out in the aforementioned post, you will normally want to purchase I Bonds from a taxable account. If you withdraw retirement account funds, the transaction will be taxable at ordinary income rates and may be subject to penalties. TreasuryDirect® accounts cannot be retirement accounts.

TreasuryDirect® sells several different types of bonds. Once you reach the purchase page, be sure to select "Series I", the second radio button from the bottom of the page.

To summarize the steps:
  1. Collect social security numbers for each of the spouses.
  2. Find a check for each of the bank accounts(s) from which you will make the purchase of I Bonds.
  3. Go to TreasuryDirect® Open Individual Accounts and open an account for each spouse. Set up strong passwords for the accounts, write them down and store them safely (A strong password is very important so please don't ignore.) Save copies of all confirmations for a paper trail.
  4. If you are asked to submit FS Form 5444, download it and take the blank form(s) to your bank or brokerage for signature guarantee(s). Mail the completed form(s) to the address stated on the form. (Update: I edited this after a reader comment below. Though I was unable to find a definitive statement online, it appears that this form is only required if 1) your submission can't be validated online or 2) you are randomly selected to submit it. Regardless, you will be instructed to submit it as part of the application submission process if it is required.)
  5. If you will use funds from a brokerage account instead of a bank, sell the appropriate amount of assets. Use funds from a taxable account — TreasuryDirect® accounts cannot be registered as retirement accounts.
  6. When the brokerage trade is completed and funds are available, transfer those funds to the bank account(s) that you registered during the TreasuryDirect® account creation process in step 4.
  7. When the bank deposits are available, log onto your TreasuryDirect® account(s), click the red "BuyDirect" tab, select "Series I Bonds" from the options, and enter your purchase. Your registered bank account number from which funds will be drawn will be in a drop-down box.
When you return to purchase more I Bonds next calendar year, you will be able to skip steps 1, 2, and 3.  TreasuryDirect® e-commerce software and paperwork requirements are a bit of a maze but the steps are necessary to protect your account. These instructions should help and you can console yourself with the thought that next year's purchases should be a lot easier.


  1. I recently set up and bought a $10000 I bond by going to treausry direct. I did not do steps 1,2,3. I want to set up an account for my wife by going to treasury diret. I am concerned to do this after your article.

    1. I had trouble nailing this down with certainty but it appears that Form 5444 is requested 1) if your personal information cannot be validated online or 2) if you are randomly selected to require it. I assume that if your online application submission didn't ask for it then you should be OK. I also assume that you can log onto the account and see your bonds?

      I am aware of 6 recent account openings and all required the form but that isn't a very large sample. In one case, the Form 5444 was submitted and TreasuryDirect informed the applicant that further validation was still required. He received approval in about a week.

      You also mentioned steps 1 and 2. Are you saying that you weren't required to provide a social security number and routing and account number for the bank? Not sure how that could work.

      Thanks for the question. I'll add this to the post.

  2. Yes the Treasury Direct site is a little bit difficult. I set up an account for I bonds about 6 months ago, but I don't recall having to snail mail them a signature guarantee document. Perhaps they have recently changed their rules. In any event, once you have the account set up it is easy to buy additional bonds. Also, it is my understanding that if you want MORE than $10,000 a year you can accomplish that via a Federal Tax Refund. Direct the IRS to NOT send you a cash refund , but instead to send you paper I bonds instead. There is a special IRS form for that. Also I think the only way to get PAPER I bonds today is via this IRS refund method. The I bonds on Treasury Direct are all just recorded in cyberspace !

    1. You are correct about the tax refund. You can purchase another $5,000 per year.

    2. Curious, which of your financial assets are not just "recorded in cyberspace?"

    3. Financial assets not recorded just I cyberspace include common stocks held via direct registration and which I have paper stock certificates...Series E savings bonds held in paper form (and accumulating interest at 4% which looks pretty good these days...Series I savings bonds held in paper form. Call me old fashioned, but I feel an added layer of security with an original paper bond or common stock

    4. There's nothing old-fashioned about being secure. You should do whatever helps you sleep at night.