I Found These Bonds, Did I Hit the Lotto?

Periodically I get a call that goes something like this: “We moved into this new house and while renovating a room we found U. S. Savings Bonds. What should we do with them?” Or the caller might say, “We were buying used furniture and taped to the underside of one of the drawers was a stash of savings bonds. Are they worth anything?” In the most dubious of questions the finder asks: “I…er…found some savings bonds. How do I cash them?”

Not to be a killjoy, but there is disappointing news for most “finders” of savings bonds. If you are not named on the bonds, you are not the registered owner. If the registered owner(s) is deceased, but a relative of yours, the representative of the owner’s estate should apply to have the bonds reissued. If, however, the party listed on the bonds is not a deceased family member, you are out of luck. Savings Bonds are registered securities. The person named on the bonds as owner, co-owner or beneficiary is the person entitled to the bond. Contrary to popular opinion, finding savings bonds is not like finding cash.

“What should I do?” The government suggests you send the bonds to them. They will determine whether the bonds will be paid out. This raises a sticky question. Do government representatives really make any attempt to find the rightful owner? To this writer’s knowledge, no. Instead, they sit and wait and see if the owner ever shows up to claim the lost bonds. The finder may actually have a better shot at reaching the bond owner.

Is there a finder’s fee? No, but there is no law that I am aware of that prohibits the owner of the bonds from rewarding a finder.

Are the bonds always worth something? Not necessarily. The bonds may have been lost long ago and the rightful owner may have replaced them. If they were replaced, the bonds you found are worthless.

The Power of an Idea

Savings bonds don’t move me. In fact, the following words come to mind: boring, slow and ancient. The same words can be used to describe a glacier and yet a glacier could also be touted as powerful, beautiful and massive. It is this other perspective, one filled with ideas, that separates my company from government information.

When I talk with people about their Series EE or Series I savings bonds we discuss data and ideas. The bits of data that comprise information are uninspiring unless one knows what to do with them. Anybody can recite data, given the proper source, but real value comes from linking data with ideas.

One of my clients has more than one million dollars in savings bonds. At a crucial time when rates were changing we had a conversation and I presented an idea. That idea resulted in $25,000 more in interest income a year for him over a ten-year period.  He is $250,000 richer. That was a powerful idea. I readily admit that not all my ideas have that kind of impact. However, my savings bond ideas have helped to shape the way bond owners think about managing their bonds and the way the government now helps bond owners.

If you need to talk about your savings bond investment, consider requesting a phone consultation. An affordable consultation might yield some ideas that change your perspective on the glacier.  Call 1-800-927-1901 to schedule an appointment.


U.S. Savings Bonds that are Earning Over 6%

Several of our clients have recently reported hearing “financial professionals” on national radio advocating cashing older Series I Savings Bonds. Before you follow that ill-fated advice, here is something you need to know. There are two groups of older savings bonds that are providing strong returns. If you bought I bonds from September 1998 through October 2001 you have some of the best bonds in the program. The fixed rates on these bonds range from 3% to 3.6%. This guarantees that you will always get that amount above inflation. When they enter their six-month earnings period between November 2009 and April 2010, these bonds will earn an annual rate of 6.06% to 6.36% (a combination of the fixed rate and inflation rate). Not too shabby when many money market funds are below 1%. I bonds purchased from November 2001 to October 2002 are also big winners. They will be earning an annual rate of 5.06% for their next six-month accrual period that follows November 2009. If you do not own these Series I Bonds and were hoping to get in on a good deal, it is to late.  Savings bonds are registered securities and do not trade on the secondary market. Savings bonds purchased since 1980 can be earning between 0% and 6.5%. If you are unsure about the interest rates that each of your bonds is earning, a Savings Bond Statement from the Savings Bond Informer provides the customized information you need. Never cash a savings bond without an understanding of the interest rates and timing issues that apply to it.


Small Potatoes are Better than No Potatoes

Have you noticed the interest rates banks are paying (or not) these days?  My friendly bankers are offering anywhere from .5% to .75% on CDs.  Money market funds and savings accounts are even more anemic at around .1%.  Pretty soon they will have to rename the latter the “non savings account.” If you have any money, banks want to use it for free.

This leads to the small world of savings bonds. I actually purchased the paper I Bond maximum, $5,000 per person per year, in December and will do so again in January. Here is why. The current I Bond pays 3.36% for the first six months and has to be held for one year. If cashed at the end of the year, three months interest is forfeited. Because the I Bond will receive 3.36% for the first six months, even if the rate is 0% for the second six months, the worst I can do is an annual return of 1.68%, guaranteed, tax deferred and exempt from state and local taxes. If inflation is somewhat normal (around 3%) for the second six months that my bonds are held I will net more than 2.52% after one year. This is not going to make me rich, but it feels better than loaning my bank money at a near zero percent return.

For more information about the I Bond please consult my annual newsletter. You can also read my comments in USA Today regarding purchasing I Bonds with your tax refund.

Detroit Free Press Asks Advice

Recently, Susan Tompor of the Detroit Free Press asked me about managing I Bonds. My advice, “Redeem Carefully!”

ibonds

Redeem Carefully!

Each I Bond has its own set of data that determines its unique interest rate.  Many bond owners have mistakenly redeemed good performing bonds by not understanding the rates that apply to their bonds.   Never cash in a savings bond without first understanding the interest rate and increase dates for that particular bond.  Ignoring this data will likely result in a loss of money.  Read the whole story here.

If you’re wondering whether now is the time to redeem a bond, or which bonds are your worst performers, I would be happy to help you.