Why Savings Bond Owners Make These Three Common Costly Mistakes According To SavingsBonds.com
Millions of savings bond owners make costly mistakes and lose money simply because they do not understand savings bond basics; how bonds work, current values, interest rate performance, which to hold and which to fold and the tax implications associated with this iconic American investment, despite the availability of online calculators and bond management services.
SPRING LAKE, N.J., Sept. 26, 2018 /PRNewswire-PRWeb/ -- Over 50 million Americans own approximately $175 billion worth of U.S. Savings Bonds. While often thought of as a simple, affordable investment for most Americans, unfortunately, many bond owners lose money and pay more taxes than necessary.
Here are the top three savings bond mistakes according to SavingsBonds.com:
1. Unaware of Savings Bond Values and Interest Rate Performance
- Bonds do not all perform the same. They have different interest rates (which can vary greatly), rules and regulations based on the series (E and EE bonds or I) and issue dates. A savings bond calculator provides cash in values, interest rates and important financial information.
- Some series offer fixed interest rates which remains the same, while others have a variable rate that changes. Certain series (such as I bonds) offer a combination of both.
- Paper bonds continue to earn interest beyond their face value (amount printed on the bond) until they reach final maturity, which is normally 30 years.
- Older paper bonds can be worth several times more than their face value.
- A savings bond calculator provides exact cash in values, interest rates, maturity & tax information.
2. Arbitrarily Cashing In Bonds And Holding Onto Matured Bonds
- When needing cash, investors often hastily redeem their oldest bonds first, which could be earning the highest interest rates, while holding onto poorer performers.
- Redeeming some older bonds just one day early could result in forfeiting up to 6 months worth of interest.
- Over $24 billion worth of savings bonds have stopped earning interest. Holding onto matured bonds is like giving Uncle Sam an interest free loan.
3. Misinformed About Savings Bond Taxes
- The difference between the purchase price and the cash in (redemption) value is considered report-able interest.
- When a bond is redeemed, or reaches final maturity, whichever occurs first, all of the interest earned (if not previously reported) needs to be reported on ones Federal Income Tax Return for that year. Bonds are not subject to state or local taxes.
- Cashing in too many bonds in one year could result in needing to report a lot of interest income. This could result in a negative tax situation, especially for those on limited incomes.
Online monthly Savings Bond Statements provide advanced alerts when bonds are within three months of reaching their final maturity and includes the amount of interest that will need to be reported if redeeming.
Bond owners should be properly monitoring and managing their savings bonds to avoid costly mistakes. Using complimentary online calculators and management services makes it easy to do. Understanding values and interest rate performance, which bonds to hold, which to fold, which are earning zero interest and the potential redemption tax implications can help investors maximize their investment and avoid paying unnecessary taxes and losing money.
About SavingsBonds.com:
SavingsBonds.com's complimentary calculator provides cash in values, interest rates and a personalized, printable, color-coded, Savings Bond Inventory Report along with a "What This Means To You" explanation. For ongoing savings bond management & updated bond values via unique monthly emailed Savings Bond Statements, try a free trial of the SavingsBonds.com Membership Advantages which includes a helpful Cash-In-Report.© and optional, informative Bond Tips.
By: Jackie Brahney, Marketing Director, SavingsBonds.com [email protected] http://www.SavingsBonds.com
SOURCE SavingsBonds.com
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