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what are savings bonds
In the United States, savings bonds are government-backed investment options in denominations ranging from $25 to $10,000. These bonds can be purchased by individuals 18 years of age or older who have a valid Social Security number, a US bank account, and a US address. Bonds issued after April 2005 have a fixed interest rate, while bonds issued between 1997 and 2005 have a variable interest rate.
The bonds can be redeemed after one year, but there is a penalty for redeeming them within the first five years. Alternatively, bondholders can choose to hold them until full maturity, which is usually after 30 years. While only electronic bonds are available for purchase today, both electronic and paper bonds can be redeemed.
There are different types of bonds, including Series E/EE, Series I, and Series H/HH. Series E/EE bonds earn a fixed interest rate for up to 30 years, Series I bonds tie a fixed rate to the inflation rate, and Series H/HH bonds pay face value and face value every six months until maturity. Involves receiving interest payments through deposits. Or redemption.
Currently, only Series EE and I bonds are being issued, but holders of other types of bonds can still redeem them. For example, H bonds, upon reaching maturity, no longer accrue interest and are suitable for redemption, while HH and I bonds may still accrue interest depending on their date of issue.
Unlocking the Value: 3 convenient ways to cash in on your savings bonds”
If you want to convert your savings bonds into cash, three convenient methods are available: online redemption through the Treasury Department’s Treasury Direct website, mail-in redemption, or in-person redemption at a local bank or credit union, provided they offer Do such service. Your savings bond must be at least one year old, and it is important to have government-issued identification to verify ownership.
Whether you acquired a savings bond yourself or stumbled upon one you received as a gift as a child, the process of converting it into cash is both achievable and worthwhile. The steps involved are manageable, and the effort becomes especially beneficial if you need the money or if your savings bond has reached its maturity date, which has stopped earning further interest.
Below are three direct ways to cash in your savings bonds: electronically through the Treasury Direct website, through the mail using the appropriate forms, or through an in-person visit to a bank or credit union. Choose the approach that suits your preferences and circumstances to easily unlock the value of your savings bonds.
To convert your savings bonds into cash, you have three primary options: online redemption through a Treasury Direct account, mail-in redemption using FS Form 1522, or visiting a bank or credit union.
Online with a Treasury Direct account
Method: Redeem electronic Series EE and I savings bonds through the Treasury Direct website.
Eligibility: Bonds must be at least one year old, and you can cash out any amount, leaving a minimum of $25 in your account.
Interest: When encashing a share, interest accrues only on the amount redeemed.
Via mail with FS Form 1522
Method: Redeem up to 30 paper savings bonds using FS Form 1522 from Treasury Direct.
Requirements: Provide bond details, Social Security number and direct deposit information for payment.
Limitations: The full value of a paper bond must be redeemed; Partial redemption is not allowed.
Identification: For bonds worth $1,000 or less, a copy of the ID can be mailed; For larger amounts, signatures must be notarized.
At a bank or credit union
Method: Some banks or credit unions may cash paper savings bonds.
Preparation: Call to confirm if they handle savings bonds and inquire about required identification and documents.
Consideration: It may be necessary to maintain an account with the institution.
When to cash in savings bonds
Timing: Wait at least a year after purchase; Encashment before five years attracts an interest penalty of three months.
Maturity Dates: Bonds have maturity dates; Series EE and I bonds mature in 30 years, and it is advisable to redeem after this period
Determining Price
Online Bonds: Check current values through your Treasury Direct account.
Paper Bonds: Use the Treasury Direct Savings Bond Calculator with series, denomination and issue date.
Tax Considerations
Taxation: Interest is federally taxable, but exempt from state and local taxes.
Options: Choose to withhold taxes annually or report all interest at the time of bond redemption.
Forms: Receive a 1099-INT form in January, showing the previous year’s interest for tax filing.
Bottom-line
Ease of encashment: Although not as straightforward as depositing a check, the process of encashing a savings bond has its own charm.
​Historical significance: Originally popular as a gift because it was easier to save than spend, consider whether keeping it or cashing in suits your financial goals.
Investment Strategies: If the money is not needed immediately, explore options such as reinvesting in high-yield savings, money markets, or even new savings bonds.