Thursday, December 02, 2004
Investing in Fixed Income:Bonds
Savings Bonds—What Do To With Them
some of the information has been excerpted from horsesmouth 10/18/99
Did you know $6.5 billion worth of U.S. savings bonds have stopped paying interest and have not been redeemed? Over 55 million people hold $180 billion worth of savings bonds. Are you one of them? Here’s what you need to know to avoid losing money:
Mistake #1: Assuming all bonds are the same. Each bond is a separate investment with individual interest rates, timing issues, values and maturity dates. Most EE bonds pay between 4-6%. Some earn as low as 0%, while there are other bonds earn as high as 15%.
Mistake #2: Redeeming bonds at the wrong time. Saving bonds are scheduled to credit their interest twice a year. If you cash a day early you forfeit 6 months worth of interest. Bonds being randomly redeemed forfeit $150 million in interest per year, and Uncle Sam keeps the money.
Mistake #3: Not recognizing your bonds that have stopped paying interest. Bonds issued in October 1959 or earlier, or those issued between December 1965 through October 1969, have ceased paying interest. Bondholders who are not aware of this are collectively giving the federal government an interest free loan of $300 million a year.
Mistake #4: Inaccurate registration of bonds. It is important to make sure that the owners and beneficiaries listed on the bonds are in line with your succession plans. If not, the bonds might wind up in the hands of someone for who you no longer intend them.
Mistake #5: Not realizing tax implications. Savings bond interest is treated as interest income and not capital gains. Savings bonds are subject to federal tax but exempt from state and local tax.
Want to know what to do and if to cash in savings bonds or convert to H bonds for some additional income? Bring in your bonds and we can review them for you and report on the status of each bond and recommend which options will bring you the most. (Note that H bonds pay a fixed rate of taxable interest at 4% for the first 10 years while saving bonds, known as E bonds, credit their fixed interest rate semi-annually, tax-deferred).
Savings Bonds—What Do To With Them
some of the information has been excerpted from horsesmouth 10/18/99
Did you know $6.5 billion worth of U.S. savings bonds have stopped paying interest and have not been redeemed? Over 55 million people hold $180 billion worth of savings bonds. Are you one of them? Here’s what you need to know to avoid losing money:
Mistake #1: Assuming all bonds are the same. Each bond is a separate investment with individual interest rates, timing issues, values and maturity dates. Most EE bonds pay between 4-6%. Some earn as low as 0%, while there are other bonds earn as high as 15%.
Mistake #2: Redeeming bonds at the wrong time. Saving bonds are scheduled to credit their interest twice a year. If you cash a day early you forfeit 6 months worth of interest. Bonds being randomly redeemed forfeit $150 million in interest per year, and Uncle Sam keeps the money.
Mistake #3: Not recognizing your bonds that have stopped paying interest. Bonds issued in October 1959 or earlier, or those issued between December 1965 through October 1969, have ceased paying interest. Bondholders who are not aware of this are collectively giving the federal government an interest free loan of $300 million a year.
Mistake #4: Inaccurate registration of bonds. It is important to make sure that the owners and beneficiaries listed on the bonds are in line with your succession plans. If not, the bonds might wind up in the hands of someone for who you no longer intend them.
Mistake #5: Not realizing tax implications. Savings bond interest is treated as interest income and not capital gains. Savings bonds are subject to federal tax but exempt from state and local tax.
Want to know what to do and if to cash in savings bonds or convert to H bonds for some additional income? Bring in your bonds and we can review them for you and report on the status of each bond and recommend which options will bring you the most. (Note that H bonds pay a fixed rate of taxable interest at 4% for the first 10 years while saving bonds, known as E bonds, credit their fixed interest rate semi-annually, tax-deferred).
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