April 15, 2024

Bucks: Online Treasury Sales Challenge Elderly Investors

The federal government has started shifting the purchase of Treasury securities to the Internet to cut costs, which means many elderly investors are facing an unwelcome change.

The United States Treasury Department has begun phasing out its older Legacy Treasury Direct program, which allows users to buy Treasury bills and other securities by mail or phone and receive paper statements. It has started limiting use of the system and will completely shut it down on Nov. 1, 2012. Users must switch to the newer, Web-based TreasuryDirect system, or arrange to buy Treasury bills, notes and bonds through a bank or broker — which typically involves a fee. Slightly more than 200,000 people are affected, according to the Bureau of the Public Debt, the Treasury arm that handles the sale and redemption of Treasury bills and other government securities.

“As a convenient alternative, I encourage you to open a TreasuryDirect account to continue investing in Treasury securities,” says a letter to investors from Paul V. Crowe, assistant commissioner of retail securities for the bureau, that went out at the beginning of April.

The problem is that most users of the older system are elderly — their average age is 75, and many are over 80. Many lack computers, or the inclination to use one. The department acknowledges that the shift will be challenging for these people and encourages them to have their children, grandchildren or other trusted helpers assist them with the change. The letter advises investors who need help to call 304-480-7711 and select Option 2. There’s also a toll-free number available through one of the Federal Reserve banks, 800-722-2678.

It’s not just the technology that poses hurdles for some users. Investors who want to move their existing securities into the new TreasuryDirect system have to submit a form authorizing the transfer, and their signature on the form must be certified by their bank, a bureau spokeswoman, Mckayla Braden, said. That means elderly people who aren’t mobile have to find someone to take them to the bank. Or if they’re lucky enough to have a long-term relationship with an accommodating bank, they will have to persuade a bank representative to come to them. “It’s difficult,” Ms. Braden acknowledged.

Paradoxically, the letter also notes that information is available on the Web at www.treasurydirect.gov. “We hope you’ll enjoy the benefits of our newer system,” it concludes.

One 85-year-old Treasury bill investor from Queens, who would talk only if his name was not used, is decidedly not enjoying the prospect of change. He said in a telephone interview that he and many of his acquaintances were unhappy about the switch, and were at a loss about what to do. He has a significant part of his life savings in Treasuries, he said, because they are a very safe investment. For decades, he has bought them by punching in information on his telephone keypad and having the purchase amount automatically deducted from his bank account. He doesn’t own a computer, and has had limited success learning about them at his local library. The Internet makes him uncomfortable, he said, and he doesn’t like the idea of “my savings floating in the air somewhere.” He may consider getting a brokerage account to buy them, if he’s forced to, he said, but he’s holding out hope that the Treasury Department may grant investors like him a reprieve.

That appears unlikely at this point. The “new” TreasuryDirect system is almost 10 years old and the government has been encouraging users to switch to it for more than six years, Ms. Braden said, because the government can’t justify the cost of maintaining the older system. In addition to simplified transactions and record keeping for most users, TreasuryDirect doesn’t charge any annual fee for large account balances (the old system charges $100 for accounts over $100,000). “We are looking in every corner to find ways to save money,” Ms. Braden said, “and this is one decision we had to make.”

As of May 1 of this year, no new accounts may be opened in the legacy system, and existing Legacy Direct account holders may purchase, or reinvest in, only 13-week and 26-week Treasury bills. So, for instance, if an investor has a two-year note that matures in June, the proceeds can be reinvested only in short-term Treasury bills, not in another longer-term investment. If account holders don’t make arrangements to switch to the new system by November of next year, or arrange for an account with a broker, the government will hold longer-term investments until maturity and deliver payments according to the instructions in the account.

Are you a user of Legacy Direct, or do you know someone who is affected by the change? Have you made alternative plans for buying or reinvesting in Treasury bills?

Article source: http://feeds.nytimes.com/click.phdo?i=1b917c8b420e46559b48b6a68a61027f

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