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What to do with savings bonds from childhood

Dr. Don Taylor, Ph.D., CFA, CFP
Don Taylor

Dear Dr. Don,
I have three $50 Series EE savings bonds issued to me (at my childhood address) back in June 1986. They were academic awards in grade school.

I have no idea what to do with them. How do I redeem them? I tried depositing them at my savings bank recently, and they sent the savings bonds back to me. What do I do with these?

Thank you,
-- Alice Accrual

Dear Alice,
Wow, you really cleaned up at the 1986 awards assembly. I used the Savings Bond Wizard available as a download on the TreasuryDirect.gov website, and I found out those bonds are worth about $100 each. The site also has a calculator that doesn't require a download.

You've earned an average yield of 5.34 percent, and you're currently earning 4 percent on the savings bonds. They stop earning interest in 2016.

Most financial institutions will redeem your savings bonds. But because your savings bank does not, it should be able to point you to a bank that will handle the redemption. You also could convert your paper bonds to electronic form through TreasuryDirect and then redeem them into your bank account. I'd only suggest this if you plan to hold the bonds to maturity, which is what I'm going to recommend.

You have about $300 earning a 4 percent yield, and you can keep it invested for about four more years. If you don't need the money today, then I suggest that you hold on to the bonds.

If you decide to redeem them now, wait until the next interest payment is credited. I assumed that the savings bonds were purchased in June 1986. If that's true, then the next interest payment is credited to the savings bonds in December. When you cash in the bonds, you'll owe federal income tax on the interest income.

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