Time to Cash in Your U.S. Savings Bonds?

Many investors purchase U.S. savings bonds because these are low-risk investments that can produce a decent return. Some people in retirement will be almost entirely invested in bonds, and others at various stages of life may use bonds to create a well-rounded portfolio and to manage risk. Bonds are available in a wide range of denominations and with various returns, giving you great flexibility regarding how you invest in them. They can also be difficult to keep track of, If the time has come for you to cash in your U.S. savings bonds to generate a profit, there are a few important things to keep in mind.

When You Cash in the Bonds

If you have savings bonds that have reached their maturity date, you should cash these investments in as soon as possible. This is because they will not increase in value beyond the specified maturity date, and you may be better off re-investing those funds in an income-producing asset or re-investing them in other bonds. If you fail to act by the maturity date, inflation can take a toll on the overall worth of your investment. When you cash your investments in, you will need to present the actual bond certificates to the bank where you purchased them or at another affiliated bank. Take note that a photo ID is necessary to cash in the bonds, and the actual bond is necessary. Photocopies are not permitted. Power of attorney are also not permitted. Typically, the person whose name is on the bond or a legal guardian for a child is required to be present. Step-parents are not permitted to cash in bonds for their step-children.

The Timing for Cashing in Bonds

If you have U.S. savings bonds, you may be wondering when is the right time to cash in your investments for a profit. Cashing the bonds in too soon can be costly, so always wait until after the expiration date has passed. Timing the sale as close to the maturity date as possible is most ideal. All Series E bonds as well as any Series EE issued before 1987 should be cashed in because they are no longer accruing value. You need to analyze the exact maturity date of each of your bonds specifically if you want to determine the best time to cash in your bonds for the maximum profit possible.

Understanding the Value of Your Bonds

You may be curious about how much your bonds are worth now. The current value can vary substantially based on a number of factors. However, if you purchased a $25 Series EE bond in 1982, it is now worth $146.90. This is just one of many financial examples indicating how bonds can grow your money over time. As you can see, with bonds, it is best to purchase the bonds and to store them in an out-of-the-way location for safe keeping until the time comes to sell them back to the bank for a profit. Your bank may provide you with more insight about the value of your investments.

What You Need to Know About Taxable Income on Bonds

Before you sell all of your bonds for a profit, you should keep in mind that all of the income or profit from the bonds is taxable. While you may still have to pay taxes either way, you may be able to mitigate your tax burden by retiring some bonds at the end of one tax year and other bonds at the beginning of the following tax year. Your financial accountant can assist you with developing the most strategic plan regarding your taxes.

While savings bonds can be a great investment to devote your hard-earned funds to, the reality is that these investments are not automatic. They require you to take action to monitor the sales price as well as to trade the bonds in at the maturity date. Because it can be difficult to remember when these dates will occur, you may set a reminder in your calendar or phone so that you do not miss the maturity date. When you follow these steps, you can more easily take full advantage of your bonds with minimal stress or hassle.

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