Here’s a blast from the past. I think I was reading an article about how savings bonds stop earning interest after 30 years, and so I asked my mom if she bought any bonds when I was born. I don’t know why, I figured that’s just what people did back then. It turned out she did, and the earliest bonds happen to stop earning interest next this month. She dug them out of storage, and sent me a scan of them:
She bought an EE savings bond with a face value of $100 for the purchase price of $50 in February of 1981. I was two years old. Using the savings bond calculator at TreasuryDirect, I found the current value to be $300.04. So over the last thirty years, the value went up 6x. This works out to an annualized return of about 6.1%.
According to TreasuryDirect.gov, for bonds issued before November 1982:
Bonds which have not reached final maturity are earning interest at either guaranteed or market-based rates; whichever produces the higher redemption value.
The guaranteed “original maturity period” was 9 years for this bond, which meant it was guaranteed to be worth the face value of $100 after 9 years. That works out to an 8.0% annual interest rate. If only we could get such a guaranteed return now, but the early 80s was a time of high inflation.
When the original maturity period ends, the bond enters a new 10-year maturity period where the government can reset the minimum rate. That’s why my bond is now earning only 4%. I can’t find the market rate for 1981, though. I could probably calculate it if I really wanted to, as it is defined as “85% of the average of 5-year Treasury marketable security yields”. The market rate in November 1982 was 13.05%!
If you have some old savings bonds, find them before they stop earning interest completely. In addition, the IRS supposedly requires you to report the interest as earned in the year of final maturity, even if you don’t redeem it. If you have a lost, stolen or destroyed savings bond, you will need to fill out Form PD F 1048. Also check out this Treausury Hunt page.
The Best Credit Card Bonus Offers – November 2024
Big List of Free Stocks from Brokerage Apps
Best Interest Rates on Cash - November 2024
Free Credit Scores x 3 + Free Credit Monitoring
Best No Fee 0% APR Balance Transfer Offers
Little-Known Cellular Data Plans That Can Save Big Money
How To Haggle Your Cable or Direct TV Bill
Big List of Free Consumer Data Reports (Credit, Rent, Work)
Yes, I’ve a stack of the paper EE bonds that are all coming to final maturity. They have been the core of my emergency fund for 30 years.
I’ve some that have stopped earning interest but I have NOT cashed them in as I would then be liable for income tax at my marginal (high) rate and it makes little sense to me to pay that rate and then to deposit the proceeds into a current liquid savings at a near nil int rate. I will hold off cashing them until and accept the zero interest until : A) an emergency or B) int rates start to rise to make a difference , or C) I retire and can cash them ( in a lower tax bracket)
All said they have served me well.
Wow, cool find. Thanks for sharing.
That time in the early 80’s was a good time to lock into some high-rate bonds and CDs. My parents bought a 15% 10yr CD during that time. Inflation and interest rates fell, but that CD kept earning 15% for 10 years.
Last year, I cashed out the first bonds in my name, bought 4 months after I was born. They were two Series E (not EE) bonds. I hadn’t noticed they’d stopped earning interest 5 years previous. I made sure that all the rest of the bonds purchased for me won’t reach final maturity for several more years.
If anyone else finds any E bonds, it’s time to cash them out; they stopped being sold in 1980, so they’re all now past the 30 year limit.
Any experience converting paper to electronic bonds?
http://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm
I have some a few years away from final maturity, I could track these through my TD account linked to Mint/Yodlee.
My grandma left me about $14K in ’80s EEs when she died. Those sweet rates must be one reason that savings bonds were popular back then and not anymore. Today, with rates at historical lows, savings for my kids are mostly in stocks.
Word of caution. Stocks are not a savings vehicle. They are speculative. A savings vehicle, by nature, guarantees the safety of your principle. That is certainly not the case for stocks.
What a coincidence. My wife has the exact same bond with the same maturity. I thought we could cash it in this month since the bond says it was bought on the first day of Feb 1981. Oh well, another 23 days.
@Tim – Sounds reasonable, I enjoy the tax-deferred feature as well. I can’t find where it says that you must claim the interest in the year of final maturity, except that if you have it in electronic form, TreasuryDirect will redeem it automatically for you and report the interest.
@Ken – Nice! Certainly good foresight.
@David – I have converted a few savings bond to electronic. They are easier to track, and you can take partial redemptions online. Some people don’t like the fact that their is no consumer protection at TreasuryDirect online. Technically if someone hacks into your account, you aren’t covered for any damages. Also, note that they’ll automatically redeem your bonds upon final maturity.
@h_corey – No, I think you’re correct! I actually have bond in Feb 2011 and March 2011. I guess they started a savings plan and stopped it after two months. 🙁
Technically, all bonds bought any time during February have an issue date of the 1st, I believe. You can redeem them this month as of Feb 1st as well.
I’ll have to ask my mom what happen to all my bonds….though I dread the answer.
Certain EE bonds (after 1986? 1988?) and I bonds can be redeemed tax-free if you use the money for qualified educational expenses, including contributing to a 529 plan. I believe TreasuryDirect.gov has more information.
Thanks! I’ve got some in a file folder I should investigate. Bought them in the 90s with part of my paycheck working for the City of New York.
I was given a paper EE bond when I graduated from high school, which I stored and eventually forgot about until a year ago and then brought to the bank to cash in. I was pleasantly surprised when it earned more than I anticipated. Turning them into the bank (Wells Fargo), however, was somewhat of an ordeal though. They looked at me like they had never seen one before, and it took a group of them to figure out how to cash one.
Sorry guys, you’re supposed to report the interest in the year the bond matures (or redeemed, if earlier).
From IRS.gov:
Reporting options for cash method taxpayers. If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways.
Method 1. Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. (However, see Savings bonds traded , later.)
Note. Series E and EE bonds issued in 1980 matured in 2010. If you have used method 1, you generally must report the interest on these bonds on your 2010 return.
Method 2. Choose to report the increase in redemption value as interest each year.
If you take an old paper bond for cashing at a bank, will you have to provide SSN and wind up getting a 1099 on the proceeds?
Oh man, I have 3 of these in my desk…I never get around to cashing them in. Glad I saw this post!
My parents bought EE bonds in 1980 and gave them to me for my 30th birthday. Only one $50 bond matured last year. I got $150 for it. I have to wait another 8-15 years for the next bunch! Oh the pain of waiting.
I had a similar experience about two years ago. The bonds matured just as I discovered them. It was like finding buried treasure!
I recently found 100 bonds from the 1990’s. Being that a fully matured $50 bond from 1982 with an interest rate of 13% amounts to $148. A fully matured bond from 1990 with 4% interest would make roughly only $100 in the same time frame. That is 1/3 or 33% loss in value.
I found a box of my grandparents old savings bonds after they had passed what do I do with them or what can I do with them ?