Treasury STRIPS may be right for you, safe investment that doesn’t pay interest

Treasury STRIPS are a type of bonds you might consider. It's popularity is partly due to being safe because they're backed by the U.S. government.

Here’s why Treasury STRIPS might be right for you:

  • STRIPS, Separate Trading of Registered Interest and Principal of Securities, are zero coupon bonds.
  • Their popularity is due to them being backed up by the U.S. government, making them a safe investment.
  • They’re fixed-income securities that don’t pay interest and are sold at a big discount to face value.
  • Let’s say you $850 for a STRIP and it matures at $1,000 in three years, the $150 is your gain.
  • Even though you don’t get interest each year like U.S. treasuries, you still pay accredited interest.
  • The solution? Hold STRIPS in your IRA or 401(k) where the growth is tax deferred.

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About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.