Back in the day, U.S. Savings Bonds were a great way to celebrate milestones, like the birth of a child or a wedding. If you still have any savings bonds sitting in a file or buried deep in the back of your safe deposit box, it may be time to cash them in.
First issued in 1980, and still in use today, are the Series EE bonds, the most common variety of bonds. They were designed for the long game—they pay interest for up to 30 years. With the end of calendar year 2018 now in sight, any bonds dated 1988 or earlier will soon stop accumulating interest. With no growth left, it’s time to transform them first into cash, then into retirement savings. Think of them as a gift from your past to your future.
A recent Investopedia article asks, “U.S. Savings Bonds: Time to Cash In?” According to the article, prior to the start of Series EE Bonds, a relative might have bought you a Series E Savings Bond. These bonds were issued from 1941 to 1980. They have also stopped earning interest.
Series I Bonds are more recent. First issued in 1998, these bonds pay a combined fixed and inflation-adjusted rate of interest. They’ll accumulate interest for 30 years. Thus, the earliest of them will stop gaining value in 2028.
To see the value of your old bonds, use the Savings Bond Calculator on the Treasury Direct website. You only need the type of bond, its denomination and the issue date. You can also add your bond’s serial number, but you don’t need to do that to get a value. As an example, a $50 bond issued in August 1982 that cost $25 is now worth $146.90. A $100 bond from February 1984 is now worth $230.64.
If you think you own some old savings bonds, but have lost track of them, you can submit a claim with the Treasury, by filling out Fiscal Service Form 1048, Claim for Lost, Stolen, or Destroyed United States Savings Bonds. Get the form on the Treasury website.
You can also redeem your old paper bonds at most financial institutions.
Remember that your savings-bond interest is taxable by the federal government, but there’s no state or local tax. You can report it and pay tax every year that you hold the bond—or wait until the end and pay the tax all at once. That’s what most people do. When you redeem your bonds, you’ll get an IRS Form 1099-INT that shows your taxable gain.
If you use the proceeds from the bonds issued in 1990 or later to pay qualified higher education expenses for you or your offspring, you may not have to pay taxes. Check the rules, including the related income limits, on the Treasury Direct website—the details are in the Education Planning section.
Reference: Investopedia (February 21, 2018) “U.S. Savings Bonds: Time to Cash In?”