It can be difficult to figure out how EE savings bonds fit into your financial plan, especially if you received them from your parents and have never researched them before. Paper bonds compound the difficulty, since we now live in a digital world. But as in our case, with paper bonds purchased for my wife by her parents, they can be a solid asset. This post walks through how we decided what to do with these inherited paper EE savings bonds.
How to look up EE savings bond values and interest rates
The first step is to look up your bonds on TreasuryDirect’s savings bond calculator. The process is a little confusing at first, so you can use this guide from seeking alpha. If you have never used the ‘Savings Bond Wizard,” skip to step 7 of the guide. If you have previously input your bond inventory with the “Savings Bond Wizard,” start from the top of the guide to avoid having to reenter all of your bonds.
I mirror the advice from the seeking alpha guide: do not enter the serial number of your bonds. The serial number isn’t required to calculate the value of your bonds, since the month and year of issue are all that matter.
How do they fit into your financial plan?
Now that you know the value, interest rate, and maturity of your bonds, you need to decide what to do with them. The answer depends on the specific bonds, your financial state, and your financial goals. Most of our bonds yield 4% interest, which is quite good compared to a high interest savings account (currently yielding around 2%). For us, it makes sense to hold the bonds as part of our emergency fund; they can be redeemed within a day or two’s notice if needed, but in the meantime they earn more interest than the rest of our emergency fund. Thanks, in laws!
Where to store and redeem EE savings bonds?
We keep up to one year’s worth of bonds in our home safe, and keep the rest in a safety deposit box at the local bank. This strikes a nice balance between convenience and security. Then every few months we redeem any matured bonds at the bank. It is best to double check the bank’s work against the savings bond calculator. Once you redeem bonds, you should also update your inventory on the calculator. Note: if you have had a name change due to marriage, you’ll probably need to bring your marriage license in addition to your photo ID to redeem the savings bonds.
Paying taxes on the interest
When you redeem the savings bonds, make sure you get a copy of the redemption receipt from your bank. This sheet shows how much interest the bonds earned over their lifetime. You will need to pay taxes on the interest either in the year the reach maturity or the year you redeem them, whichever comes first.