Do Savings Bonds have to mature before I can cash them?
Thursday, July 29th, 2004
Categorized as: Cashing in US Savings Bonds
I have several Savings Bonds in my childrens' names. I want to cash them in for college, but I am not sure when they mature. These bonds range in date from 1989 through 2003. If I am cashing these Savings Bonds in, do the minor children have to sign the back, or do I need to do something else in order for them to be cashed?
Tom's response
You don't have to wait until a bond matures before you can cash it. You can cash a Savings Bond one year after the issue date. However, if you cash it before five years, you lose the last three month's interest. Our calculator will give you redemption values that have already been reduced by this penalty.
If one of your children's names is on a bond as the registered owner and if that child is old enough to go to college, he or she can just take the bond to a financial institution that handles Savings Bonds (most banks, savings and loans, and credit unions handle them) and ask to have it redeemed. Your child will have to show identification and will have to sign the bond in front of one of the people at the bank.
It will pay you to take some time to figure out which of your Savings Bonds to cash first. You want to keep the ones paying the highest rates and you want to get as many as you can past the five-year date. My book, Savings Bond Advisor, has an exclusive Alert Recommendation for each savings bond issue date that can help with this decision.
You also need to be careful when you cash the Savings Bonds that were issued before 1997. They only pay interest every six months, so there's a hidden interest penalty of up to six-months interest with these bonds.
Because the bonds are in your children's names, they're not eligible for the savings bond education deduction.
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How do I find the value of a stock at he time of the bond owner's death? If the bond was issued in 4/1986 and the owner died in October/95 as an example.
Steve - the information you're looking for is here: Cost basis for inherited Savings Bonds.
Tom Adams
I have several bonds going back to 1958. I cannot find them nor the booklet that listed them. Is there anything I can do to replace them?
Gerald - the information you're looking for is here: How to recover lost Savings Bonds.
Savings Bonds issued in 1958 haven't earned any interest for nearly a decade. You really need to get these bonds cashed and the money put back to work.
Tom Adams
Can we still purchase I savings bonds?
Debbie - Yes.
Tom Adams
My children recieved saving bonds as gifts for thier birthdays and Christmas. One is still in college and the other has her degree. Should they cash the bonds in or hang on to them for a rainy day? Most are EE series.
Deborah - the bonds earn interest for 30 years. There are typically a lot of family emotions connected to Savings Bond gifts that make the cashing decision difficult and there is no best choice for everyone.
Tom Adams
What is the mature rate for a savings EE bond? I've been purchasing bonds for my son's education since he was born….he's now ready to go to college and I was wondering which ones should be cashed first.
Is there a better option for saving for the rest of his education? Would cashing in the Series EE bonds I have and investing in another avenue be a better choice?
Joan - There's no short answer to the question of which ones to cash first. My book goes into detail on this.
I think at this point the EE bonds are your best investment choice - you're expecting to spend it all in the next four years, right?
You are aware that you may be eligible for a tax deduction since you're spending the money on a dependent's college education? There's more info on this here.
Tom Adams
I'm trying to decide the best time to cash in my savings bonds (to avoid the six-month interest penalty).
Susan - interest is paid in six-month cycles on the 1st day of the issue month and the first day of the month six months later.
So it's best, for example, to cash a December bond issued before 1997 in December or June. For bonds issued after that it doesn't matter.
There are a few other considerations besides this one in picking the best bonds to cash. If you have an investment larger than $10,000 it would pay you to spend a weekend reading my book.
Tom Adams