Finance Quick Answers
How do I know which savings bonds to cash in?
Savings bonds may be the most complex financial instruments known to man when you're trying to figure out which ones to redeem. Cashing in bonds at the wrong time costs owners more than $100 million a year in lost interest, estimates author Donald Pederson.
At this point, try not to redeem series EE bonds
until they are five years old. Thanks to a quirky rule,
these bonds get a big bonus on their fifth birthday,
jacking the real yield to more than 15% for the six
month interest period that includes the fifth
anniversary. After that the interest will average 4% to
5%. Of course that's better than the 0% being earned by
almost $6 billion worth of bonds that have ceased paying
interest altogether because they are too old. If you own
any of these, cash them in now.
Source: Roha, R. R. (1999, July). Family finances - don't cash these savings bonds. Kiplingers, p. 52.
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Monday, July 28, 2008