US Savings bonds were given as birthday gifts and rewards for children. They were looked at as a good way to save money for college or other things. Many people consider them a wise investment. The money is guaranteed, plus if you buy EE savings bonds, you don’t need to pay taxes on interest if you use the savings bonds for education expenses. On the surface, this sounds like a solid investment strategy.
You buy the bond for the amount you want. In the past, you buy the bond for half the amount of the face value and it would take about twenty years to mature so that you can cash it in for the full value.
Are savings bonds a good investment for college?
However, savings bonds are not the best investments, even for colleges. The rate of return is set by US government and market conditions and it can take up to twenty years for the bonds to fully mature. That’s a pretty low rate of return. Some people don’t realize that it will take so long for bonds to earn and are counting on the money to be there sooner. If you already have the bonds and will need them for college soon, it may be easier to remove them as you need them.
- College students can redeem the bonds at any time
- Bonds are generally not worth face value until twenty years after issuance
- 529 plans may offer a better rate of return
What are the benefits of savings bonds?
Another reason people choose a savings bonus is to protect the money they give their grandchildren from parents who can spend the money on other things. The law allows the guardian to withdraw savings bonds for a minor and you better open a 529 account with you as a trustee on a grandchild’s account, if you plan to help contribute to money for a child Education.
- Savings bonds are easy to cash in at a local bank
- You don’t have to wait until the debt comes due
- Taxes are due the year you redeem the savings bonds
What are the alternatives to US Savings Bonds?
There are alternatives to US savings bonds that will provide a similar amount of security with a better rate of return. You might want to consider looking at CDs or annuities if you want very economically prudent investments. You can also consider choosing mutual funds with a strong rate of return. They will provide a better rate of return on your money over time. If you’re looking for a way to fund education, a good 529 plan or educational IRA are the best ways to save for education.
Traditional savings accounts can offer more flexibility than a US Savings Link. If you’re considering savings bonds to give away as prizes for young children’s contests, you might want to choose a Visa gift card or some other type of prize, since it takes savings bonds if long to mature. It may not help them with their education, but it will be more convenient and helpful overall.
How can I cash out a savings loan?
If you have US Savings Bonds, you can cash them at your bank. They will give you the current amount you have won.
You will need to complete the paperwork, as they must report any interest earned over $10 to the IRS. The bank will need at least one form of identification, although they will need two if you don’t have an account at the bank. There are several different series of savings bonds, although EE bonds are the most common, although you can cross into older bonds which you can also withdraw.
If you find bonds not issued to you, you will not be able to cash them. The owner of the bond is the only one who can negotiate it. If you receive savings bonds as an inheritance, you will need to complete the appropriate documentation and settle the estate in order to withdraw them. It can be a complicated process, and it can take a long time. If the savings bonds are old, they will continue to earn interest, and you may have more money than face value.
You can also check online to find out how much savings bonds are worth.
What should I do with the savings bonds I currently have?
You can withdraw savings bonds and put them into better investments to get a higher rate of return. If you plan to cash in more bonds, you’ll need to be prepared to declare them on your taxes. Depending on the amount of interest, you may need to plan to pay taxes when you file your taxes. If the amount is large, you will need to contact your accountant to see how to change your tax situation. However, if the interest is minimal, more than likely you should be able to cover the taxes without too much trouble. If you regularly receive interest from dividends or other investments, simply add the interest earned to that amount when planning your taxes. In some cases, talking to a bond insurance company can be helpful as well.
