What To Do With $15K Worth of Series EE Bonds?

**maat55** · 12-31-2008, 05:10 AM

I personally would cash them in and put the money into a Stock Mutual Fund, the market is low so you may see better returns in the future.

If you qualify and are not funding a Roth, you can fund it. Depending on your age and marital status as to how much.

**Like2Plan** · 12-31-2008, 06:40 AM

Originally posted by BouldinG View Post

As the title says, I have 15K worth (spread over $100 notes dating from 1980 on) in unredeemed series EE bonds (earning 4% I believe).

As I know nothing about investing or sound money practices, I'm worried about the current economic climate and what a possible hike in inflation could do to the interest earned.

What's the best thing to do with them? Leave them alone? Cash them out and invest in other ways?

The bonds currently have no clear intended use, but I had imagined using them for a downpayment on a home. Again, not sure if this is their best use.

Any advice is appreciated.

Thanks.

Do you have a fully funded emergency fund? These bonds would work quite well for that purpose. You can put them on deposit at treasury direct and set them up so you can do a direct transfer into a checking account if you had a need of funds. In the meantime, they continue to grow interest (assuming it is tax defered?)

One thing that you are going to have to watch is savings bonds will no longer pay any interest after 30 years.

If you do decide to redeem them, most likely you will have over 1/2 the value attributed to earnings and will be subject to federal taxes if you have deferred the taxes on the interest), so you may wish to spread it out over more than one tax year (and also adjust your withholding to compensate).
Or, do you pay tuition and fees for anyone? There are several tests involved to determine if the earnings used would be federal tax free (assuming you have bonds issued after 1989 ) Link to irs web site

**scfr** · 12-31-2008, 07:18 AM

Think about holding on to at least some of them until maturity.

- Some of them might be earning as much as 7.5% which would be hard to beat elsewhere right now, and certainly could not be beat with that level of safety.Individual - EE/E Bonds Issued before May 1995

- If you have children you are planning to help with college, or you yourself have (or will have) higher education costs, there could be tax advantages to using the redemption proceeds from your EE Bonds to pay those education costs. Individual - Education Planning

I'd suggest you read up on EE Bonds in general and then decide what is best to do in your situation. There's lots of information at the Treasury Direct web site. Individual - EE Savings Bonds In Depth

If you have paper bonds, I believe you can have them converted to a Treasury Direct account. As Like2Plan said, Treasuy Direct accounts are very easy to use. No fees, with direct (and immediate ... no "float" time) deposits in to an attached checking account. Frankly, setting up or making a change to a Treasury Direct account can be a bit of a time-consuming hassle, but worth the effort.

**Like2Plan** · 12-31-2008, 07:59 AM

I agree with scfr about reading up in the rules. If you decide to redeem them, you will want to time it to maximize the interest paid. It's been a while since I've redeemed any bonds, but I believe some of the older bonds pay the interest every 6 months. So, if you purchased one a month over time, you will want to look at that. One thing you can do is put it in the savings bond interest calculator and model the interest paid based on different redemption dates. Calculate the Value of Your Paper Savings Bond(s)

**BouldinG** · 12-31-2008, 03:15 PM

Thanks all, I've done a little investigating based on your responses. None of my bonds are at full maturity, most have doubled with interest, none are at 7.5%. The majority of them fall around 2.3% and then a third are at 4%.

Honestly, tax was something I completely blanked on. I haven't been reporting the interest yearly, so I'll take a hit when I cash out. Knowing this, using them for a large sum payment (like a downpayment) might not be the best idea.

Leaving them alone, they bring in about $600 a year.

So, now I feel stuck. I'm currently enrolled in a retirement pension fund, have a "Money Market" savings account at 1.3% interest with about 12k, about 9k in my checking account (stupid I know), and these bonds. I'm 29, single, and on the verge of buying a home, and haven't thought about proactively investing until now.

I know it's a loaded question, but what's the best thing to be doing with these pockets of cash?

**maat55** · 12-31-2008, 03:47 PM

IMO, you should first payoff any outstanding consumer debt, make sure you have an EF of 3 to six months, fund your roth's if quailified and/or fund traditional IRA. Also, invest in any company 401k to the match.

I would still cash in the bonds and add it to the other excess funds and follow the chain above, any money invested in retirement plans should be in stock mutual funds, IMO.

**scfr** · 12-31-2008, 07:48 PM

Originally posted by maat55 View Post

IMO, you should first payoff any outstanding consumer debt, make sure you have an EF of 3 to six months, fund your roth's if quailified and/or fund traditional IRA. Also, invest in any company 401k to the match.

I would still cash in the bonds and add it to the other excess funds and follow the chain above, any money invested in retirement plans should be in stock mutual funds, IMO.

A couple points:
- OP made no mention of any consumer debt
- The EE bonds can be the EF (emergency fund). I don't see the logic in selling a bond earning 4% to transfer it to a MMA earning 1.3%.
- OP did mention that s/he is enrolled in a retirement pension fund.

BouldinG - If the rate on the bonds is fixed and not variable, and if when you say that you are "on the verge of buying a house" you mean that you are ready to buy and just wondering which pile of money to use for the down payment, I'd use the money in the checking account first, and then the money in the MMA (assuming you've a way to sell off the bonds and access the funds in case of an emergency). Individual - Redeem EE/E Bonds and Savings Notes

**maat55** · 12-31-2008, 09:13 PM

[QUOTE]

Originally posted by scfr View Post

A couple points:
- OP made no mention of any consumer debt
- The EE bonds can be the EF (emergency fund). I don't see the logic in selling a bond earning 4% to transfer it to a MMA earning 1.3%.
- OP did mention that s/he is enrolled in a retirement pension fund.

My original post covered that senario.

As others have stated as well, he may use it, in suggestion, for the possibility he has not covered other bases first.

As an EF, I would sooner have it an high yield savings earning 3.75 with provident direct than tied up in bonds.

As an retirement investment, I would use mutual funds.

Because we have little to go by, I gave a chain of possibilities. As others have.

What To Do With $15K Worth of Series EE Bonds?