Savings Bonds and why I can't stand them

[NYCDiane]

My DS got a $100 bond as a reward at school last year. He thought it was like $100. Sadly when he asked when it woudl be worth $100 I couldnt tell him lol. I havent seen one in years lol

Sure, but he can cash it out now and get the $50 that they paid for it.

 

[Green Tea]

They are tax free for college when in the parent's names. If they are in the child's name you will pay tax on the money. Even if the child is only a co-owner, they will be taxed.

 

[eliza61]

1. You buy savings bonds through your (or any) bank. You don't have to "find a place to buy them")

2. You don't pay taxes on them when you cash them in.

3. Savings Bonds aren't meant to be purchased and cashed in a couple of years later. The typical savings bond has a 20 year maturity date and will stop increasing in value at that time (it says it right on the bond)

4. Savings Bonds are a GUARANTEED INVESTMENT, GUARANTEED TO DOUBLE YOUR MONEY --- a lot more than I can say for the stock market, 401k plan, IRAs or anything else. People usually buy them for a child at birth or christening or first birthday or even up to the child's 5th birthday as a gift for the future.

5. You can easily check the value of your bond by going to Bing or Google and typing in "what is my savings bond worth" and it will lead you to the .gov website where you can find out. You don't have to schlep into a bank to find out.

When my kids were babies, I decided to buy them and my neices and nephews 200 savings bonds every year on their birthday. Since they have so many aunties and uncles the kids were getting truck loads of toys, one year they got over 1000 dollars worth of video games. I thought this was ridiculous. anyhoo, now that they are going to college, all of my neices and nephews have called me and said how nice it is to have a couple of thousand dollars handy.

We got them series EE bonds and series I bonds

they were a easy way to save some money back in the day, I remember at my job you use to be able to purchase them automatically.

 

[java]

I was able to more than triple the rest of the money he got at this event ( I have stock market experience) I think that's what surprised me when my sil gave it to him 10 years ago.

1. You buy savings bonds through your (or any) bank. You don't have to "find a place to buy them")

2. You don't pay taxes on them when you cash them in.

3. Savings Bonds aren't meant to be purchased and cashed in a couple of years later. The typical savings bond has a 20 year maturity date and will stop increasing in value at that time (it says it right on the bond)

4. Savings Bonds are a GUARANTEED INVESTMENT, GUARANTEED TO DOUBLE YOUR MONEY --- a lot more than I can say for the stock market, 401k plan, IRAs or anything else. People usually buy them for a child at birth or christening or first birthday or even up to the child's 5th birthday as a gift for the future.

5. You can easily check the value of your bond by going to Bing or Google and typing in "what is my savings bond worth" and it will lead you to the .gov website where you can find out. You don't have to schlep into a bank to find out.

 

[nunzia]

The new savings bond online system is awful. I would suspect that the majority of bond purchasers are "older" (like grandparents who buy them for every birthday). I don't know how anyone is supposed to figure out how to use the online system./

I buy the online 'I' bonds and it's super easy. They earn much more than any other standard savings choice..I'm buying them to gift to my grandkids when I die and hope they don't feel like I've given them drying paint.

 

[leahjade]

They are tax free for college when in the parent's names.

We cashed in a ton for our daughter's college recently and some years were taxed and some weren't so you need to check it out on their website.

 

[Fire14]

I cashed in my mature one last year and I had to claim it on taxes but I don't recall paying taxes on it.

 

[Grumpy's Gal]

Unless the rules have changed recently (?) no you don't pay taxes if you use them to pay for college.

please check on this -- they have VERY SPECIFIC rules for not paying taxes if you use them for education, including who bought them..
Rules to Qualify for Education Tax Exclusion on Savings Bonds

http://www.savingsbonds.com/bond_basics/education-tax-exclusion-savings-bonds.cfm

There are 7 rules the goverment requires be forfilled prior to being able to qualify for education tax exclusion for US Savings Bond:

Qualified higher education expenses must be incurred during the same tax year in which the bonds are redeemed
You must be at least 24 years old on the first day of the month in which you bought the bonds
When using bonds for your child's education, the bonds must be registered in your name and/or your spouse's name. Your child can be listed as a beneficiary on the bond, but NOT as an Owner or Co-Owner
When using bonds for your own education, the bonds must be registered in your name
If you are married, you must file a joint return to qualify for the exclusion
You must meet certain income requirements - income requirements for education tax exclusion for US Savings Bonds - listed below
Your post-secondary institution must qualify for the program by being a college, university, or vocational school that meets the standard for federal assistance (such as guaranteed student loan programs)

Qualified Expenses

Qualified educational expenses include:

Tuition and fees (such as lab fees and other required course expenses)
Expenses that benefit you, your spouse, or dependent for whome you claim an exemption.
Expenses paid for any course required as part of a degree or certificate-granting program.
Expenses paid for sports, games, or hobbies qualify only if part of a degree or certificate program.

The cost of books or room and board are NOT qualified expenses.

The amount of qualified expenses is reduced by the amount of any scholarships, fellowships, employer-provided educational assistance, and other forms of tuition reduction.

You must use both the principal and interest from the bonds to pay qualified expenses to exclude the interest from your gross income. If the amount of elegible bonds you've cashed during the year exceeds the amount of qualified educational expenses paid during the year, the amount of excludable interest is reduced pro rata.

Example: Assuming bond proceeds equal $10,000 ($8,000 principal and $2,000 interest) and the qualified educational expenses are $8,000, you could exclude 80% of the interest earned, which would equal $1,600. (.80 x 2000 = $1,600)

 

[JB2K]

My parents had two savings bonds in their safety deposit box when they died. I got a letter from the clerk of court two weeks ago that allows me to dispose of them. There's a $50 and a $100, so I was thinking they were worth $150. Turns out the $50 is worth about $72 and the $100 $76, or about $150!

So would y'all cash these in?

If both bonds have reached maturity and is no longer accruing interest, sure.

Can I do it at the bank or did that also change at the end of last year? My intention had been to dispose of them b/c I'm trying to tie up all the lose ends in my parents' estate.

You can still cash them in at nearly any financial institution in the U.S. (and with the exception of some credit unions, you don't have to have an account, there).

 

[JB2K]

I cashed in my mature one last year and I had to claim it on taxes but I don't recall paying taxes on it.

Exactly -you would claim it on that year's taxes (much as you would interest from a interest-bearing account at your local bank).

 

[goodfood4ursoul]

I'm with OP on this one and with good reason.
I used to buy $50 bonds for all the nieces/nephews when they were born.
But when I went to cash in bonds that others had given to me
when I was a youngster, at the correct time- even a little bit after
they were supposed to have reached maturity, the bank told me
that the government had changed the maturity on the bond in the time
since it had been issued and it would be a few more years until it reached maturity.

We were cashing them to be used as part of a down-payment on a home,
so we were less then thrilled with that news.

So, it seems to me, that there is a contract between a bond-holder & the government.
And they simply decided they wanted to hold onto my money a little bit longer, which breaks our contract.
This was during the early 1990s so there was no internet to look this stuff up on.
That was the last year I bought a savings bond for anyone.
I mean, really, the government is so trustworthy and handles our tax money so well

I don't know about what goes on at your home, but in ours we pay for what we can afford,
and if there is no money for something we do not buy it.
Unfortunately our federal government doesn't work that way...
Which leads me to another thought...
Are you sure that our government will have any money to pay you back in 20 years?
http://www.cbo.gov/publication/43142

The Congressional Budget Office (non-partisan) says this about the current administration's budget and the road we are now on:

"Before accounting for the economic effects, CBO estimates that
the President’s proposals would add a total of $2.0 trillion to deficits,
resulting in a cumulative deficit of $3.2 trillion over that period.
The economic feedback from the President’s proposals would yield projected
deficits totaling between $3.3 trillion and $3.6 trillion over that period."

Some people have actually said that with the economic effects,
our economy will implode in the next 15 years if we stay on our current path
and do not cut government spending drastically.

So I'm not really feeling very confident in investing in government bonds at this point.

I hope for the sake our our kids and grand kids we can turn this around...

 

[kirstenb1]

My sister used to buy our older dd some type of bond (I think she said treasury, but I really can't remember). Anyway, she never handed me any type of documentation or paperwork, so I can't even remember.

Honestly, it was hard to explain to dd why she was getting a piece of paper, when she wanted Polly Pockets or Barbies. This was only 10 yrs ago, so I guess we still have a while to see what the bottom line is.

 

[mks18412]

My kids have the EE bonds. You would buy for $25 then when it matured it would be worth $50, $100 doubles to $200 and so on.... Not sure if they earn any interest on top of the doubling amount.... Grandparents would buy for the grandkids. They have matured but dont know what to do with them. Cash them out and put into a CD or 529.

 

[runwad]

please check on this -- they have VERY SPECIFIC rules for not paying taxes if you use them for education, including who bought them..
Rules to Qualify for Education Tax Exclusion on Savings Bonds

http://www.savingsbonds.com/bond_basics/education-tax-exclusion-savings-bonds.cfm

There are 7 rules the goverment requires be forfilled prior to being able to qualify for education tax exclusion for US Savings Bond:

Qualified higher education expenses must be incurred during the same tax year in which the bonds are redeemed
You must be at least 24 years old on the first day of the month in which you bought the bonds
When using bonds for your child's education, the bonds must be registered in your name and/or your spouse's name. Your child can be listed as a beneficiary on the bond, but NOT as an Owner or Co-Owner
When using bonds for your own education, the bonds must be registered in your name
If you are married, you must file a joint return to qualify for the exclusion
You must meet certain income requirements - income requirements for education tax exclusion for US Savings Bonds - listed below
Your post-secondary institution must qualify for the program by being a college, university, or vocational school that meets the standard for federal assistance (such as guaranteed student loan programs)

Qualified Expenses

Qualified educational expenses include:

Tuition and fees (such as lab fees and other required course expenses)
Expenses that benefit you, your spouse, or dependent for whome you claim an exemption.
Expenses paid for any course required as part of a degree or certificate-granting program.
Expenses paid for sports, games, or hobbies qualify only if part of a degree or certificate program.

The cost of books or room and board are NOT qualified expenses.

The amount of qualified expenses is reduced by the amount of any scholarships, fellowships, employer-provided educational assistance, and other forms of tuition reduction.

You must use both the principal and interest from the bonds to pay qualified expenses to exclude the interest from your gross income. If the amount of elegible bonds you've cashed during the year exceeds the amount of qualified educational expenses paid during the year, the amount of excludable interest is reduced pro rata.

Example: Assuming bond proceeds equal $10,000 ($8,000 principal and $2,000 interest) and the qualified educational expenses are $8,000, you could exclude 80% of the interest earned, which would equal $1,600. (.80 x 2000 = $1,600)

Thanks for the informative post and the link. I've bookmarked it since we'll be using these for DD's college in a few years. That's too bad about the bonds not being able to be in the child's name. Most grandparents and aunts and uncles put them in the kids names not the parents. But I'd imagine most kids incomes wouldn't generate a tax bill anyway.

 

[dcfromva]

Why I hate them:

My uncle bought my son a decent amount in savings bond when he was born.

Uncle died and his wife swears she gave us the original. She did not. We have a paper that says "this is not the actual bond. You have to have the original". She can't even be bothered to possibly look for it. It would be nice to have it now that he's in college.

Here is a link for you that will give you info on how to get the replacement bonds:

Replacing or Reissuing EE or I Bonds

You don't even need the serial numbers although it helps.

 

[Colleen27]

I think the main appeal was to the "Greatest Generation" - my grandmother loved them and gifted them to all the grandkids and great-grandkids. No risk along with the patriotic connotation and a large degree of familiarity/comfort made them her investment of choice. But back then they didn't take 30 years to mature; the EE series bonds she gave my oldest in '98-'99 won't even outpace inflation and won't mature fully until 2028/9, but the ones she gave me when I was a child matured in about 1/3 the time.

 

[disneybound31]

1. You buy savings bonds through your (or any) bank. You don't have to "find a place to buy them")

2. You don't pay taxes on them when you cash them in.

3. Savings Bonds aren't meant to be purchased and cashed in a couple of years later. The typical savings bond has a 20 year maturity date and will stop increasing in value at that time (it says it right on the bond)

4. Savings Bonds are a GUARANTEED INVESTMENT, GUARANTEED TO DOUBLE YOUR MONEY --- a lot more than I can say for the stock market, 401k plan, IRAs or anything else. People usually buy them for a child at birth or christening or first birthday or even up to the child's 5th birthday as a gift for the future.

5. You can easily check the value of your bond by going to Bing or Google and typing in "what is my savings bond worth" and it will lead you to the .gov website where you can find out. You don't have to schlep into a bank to find out.

You DO pay taxes on the investment income unless used for college/educational expenses...

And you can only buy them online now- not through any bank.

My MIL had to stop a year or two ago when the credit union and bank stopped having the paper form to fill out...she has no idea how to get online and order them- thank God. My kids are just a few years our from college and have bonds that will make about $15 upon maturity after 30 years...when they are 35 and 40 years old...lol

I do have several I-bonds that are each earning 5.25% that I refuse to cash in because I cannot get that rate anywhere else and plan to use them for DS college in 5 years. By then I will have almost doubled my $ with them- I invested $25,000 (my brother died at 25 and had named my son, his nephew, beneficiary of life insurance) and will have about $48,000 in 2015 tax-free for his school.

 

[Handbag Lady]

I had about $8500 in EE bonds given to me three years ago. They were each purchased once a week and my dad got them for me and my sister. Of course he put them in my name.

I had TON$ to pay in taxes. It put us off for the year since we are close to another bracket.

The odd thing is, I had them in my possession for about a year, thinking they woudl really go up in value the longer I waited. They didn't. I think I gained two cents each by waiting a year.

I'm happy to have had them and even looked into getting them once a week when you could get them at $50 for paying out $25.