CHECK YOUR U.S. SAVINGS BONDS
Lori Z. Bahnmueller
Michigan Credit Union League - Your Money Matters
SOUTHFIELD, Mich., January, 1999 — U.S. Savings Bonds have been a part of Americans' savings plan for years. Born in the need to raise money for World War I and World War II, these simple little investments have often proven to be a good value. Many homes have a few of these bonds tucked into drawers. But the time has come to check those savings bonds to make certain all of them are still earning you money.
Last December, a whole new era of savings bonds reached full maturity. That is important because when a bond reaches full maturity it stops paying interest. You may recall that you buy bonds for less than their face value. In other words, when you go to your credit union or banks to buy a U.S. Savings Bond, you pay $25 for a $50 bond, $50 for a $100 bond and so forth. The bond keeps growing in value until it reaches the value printed on its face. It may even keep paying interest beyond the face value but at some point, it stops paying interest. While those bonds will never lose their current value they may never amount to any more. Now is the time to check your bonds to determine if they have reached final maturity and, if so, take a look at the options available for cashing in those bonds.
For years bonds were issued to earn interest for 40 years. In December of 1965, however, bonds were designed to earn interest for only 30 years. That 30-year mark arrived on December 1995.
If you have any Series E or EE bonds issued after December 1965 or bonds from February 1956 or earlier they have either reached full maturity or soon will be. To determine the issue date of your bond, refer to the top right corner for typed month and year. The date stamped on the bond is NOT the issue date. If you find yourself holding onto one of these mature bonds you have two options:
1) Cash the bonds once they stop paying interest and use that money some other way, or 2) convert the bonds into Series HH bonds and earn 4 percent. The advantage of converting the bonds rather than just cashing them and buying new bonds is that you don't have to pay capital gains taxes on the interest you earned if you convert them. But you only have one year from the date of final maturity to convert your bonds and avoid taxation.
Should you find that you do hold some of these matured bonds, you are not alone. Eileen O'Neill, Chief Operating Officer of the Michigan Credit Union League, estimates that $2.2 billion worth of savings bonds in private hands have stopped earning interest. At 4 percent that's an annual loss of $88,000,000 in unearned interest!
Here are a few tips on tracking your savings bonds:
1) Start by listing the issue date, size and bond number. This allows you to keep an eye on when they are nearing maturity and quickly reference their value. Also, if a bond is ever lost or stolen, this is the information needed to have another issued in its place.
2) Next, remember that interest is not always paid based on the date that the bond was issued. To accurately determine their value you should request an interest accrual table from the savings bond division. The Office for Savings Bonds in Detroit can be reached at (313) 226-7375.
3) Finally, never keep your tracking information in the same place that you keep your bonds — if they disappear, so does your information.
Savings bonds are like any other worthwhile investment and require the watchful eye of their owner.
Lori Z. Bahnmueller is director of Public Affairs for the Michigan Credit Union League, a statewide trade association representing Michigan credit unions. Send your financial questions to "Your Money Matters" c/o the Michigan Credit Union League, P.O. Box 5040, Southfield, MI 48086-5040, or stop by our Web site (www.mcul.org) to learn more about smart money management.