Saving bonds are a debt instrument that is issued by the U.S. government. They are sold to people who are individual investors – usually in small amounts. Saving bond certificates have face value denominations in the range of $50 to $10,000. When you were in to school you may have received a savings bond as prize for winning some competition, or maybe you got one from Grandma as a birthday present. Once you have a savings bond, it’s not always obvious when you should redeem it.
It is difficult to see the known benefits of a savings bond. Most people are interested in buying stocks via a broker. Or maybe you’re in to mutual funds, or have a 401(K) plans from work. many people have become more interested in online trading of stock shares. So when should you redeem a savings bond? The answer, as is the case with many things, is, “It depends.”
Saving bonds are based on trust and credit of the U.S. government and are one of the safest forms of investment you can find (unless they keep bailing out everyone, in which case, this may not remain true). If you misplace your savings bonds the government will replace them if you provide details about the certificates such as the serial number, date of issue, and Social Security Number of the owner. Because of this, you should always keep a record of this data in a different location from the actual certificates themselves.
Another advantage of savings bond certificates is that they can be bought with a low initial investment – like $25. Saving bonds are still good for long term investment, especially for children who will be studying in school or college. You can use them to make a little money, but still protect your initial principal investment until it is needed. Once you need the money – for example, when your child goes to college – you can cash them out.
In addition to the above benefit, saving bond certificates protect you from paying income tax on the money that is made off the interest. Income tax is waived on earnings of series of EE Bonds until you redeem the savings bonds. Redemption of savings bonds can be done through a credit union, local bank, or other financial institution. In addition, you can also contact your nearest Federal Reserve Bank or U.S. Bureau of Public Debt to get them cashed.
Though savings bonds are long term investments, you are likely going to need to redeem them at some point in time. Usually this happens when you need money to return to the school, are planning retirement, or maybe you have some medical expenses that need to be taken care of. For that matter, just about any reason you would need to spend the money on something else is a perfectly good reason to redeem your savings bonds. It’s not rocket science.
If you do not own a savings bond, but are listed as the beneficiary on a bond which was created by someone who died, you will need to produce a death certificate for the owner of the bond. You can redeem savings bonds in the name of your children. Redemption of bonds possible if you hold them for less than five years, however, you will incur a penalty of three months interest.