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Treasuries

Many senior citizens are wary of investments that may seem too risky or that they do not understand. One investment that lets many senior citizens sleep at night is U.S. Government bonds and notes. No investment is safer than U.S. Government bonds and notes. These U.S. Treasury obligations are backed by, as they say, the full faith and credit of the United States Government, which means that unlike corporate bonds, where if the company fails, your investment is in trouble, with Treasury notes, bills and bonds, if the U.S. Government goes under, we all have bigger problems than our investments.

Taxes on Treasuries

U.S. Treasury bonds and notes are not subject to state and local taxes although they are subject to federal income taxes. A common axiom is that if interest rates go up after you have bought a Treasury note or bond, the value of your investment goes down. There is a kernel of truth in this, but only a kernel. It is accurate to say that as interest rates rise and new notes and bonds are issued at the then current higher interest rates, the amount that you will pay for your lower interest bonds and notes if you sell them will be discounted to compensate for the interest rate differential. However, if you do not intend to sell your notes or bonds, but rather keep them until maturity, any change in value is irrelevant to you and you will receive the full value of your note or bond.


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