Cashing in savings bonds

[screamingflea]

I came across a couple as I was going through my files. One is matured, the other is .. eh. Interest rates are just embarrassing these days, so I figure I may as well. Can anyone tell me where I can cash them in without sacrificing any to a broker or bank?

[loosechickens]

http://www.bankrate.com/brm/news/dollardiva/20010827a.asp

[CathyA]

http://www.treasurydirect.gov/
My kids have cashed in some of their EE savings bonds and they just took them to their bank and cashed them. The bank doesn't get any of the money. You will, though, have to pay taxes on them as income.

[screamingflea]

Thanks all. It turns out one of them has matured, and the other one gains 4%. I can do a lot better than that with my IRA at 10%, so in it goes!

[Valley]

I would love to know where you are getting 10%...I haven't found anywhere that is giving much over 1-2%.
Thanks

[reader99]

I would love to know where you are getting 10%...I haven't found anywhere that is giving much over 1-2%.
Thanks

Me too. Best I have is CDs I locked in for 5 year terms at or near 5% back when rates were that high.

[screamingflea]

I put it all in the Wellesley mutual fund at Vanguard, and had it designated as an IRA. In the past one year it's gotten 12.75%, and 10.2% since inception about 40 years ago. Most of my assets are in one of their Lifestrategy accounts - it's gotten 8.75% since inception.

[loosechickens]

just remember that you are comparing apples and oranges. with the savings bonds and/or CDs your principal is protected, and you are sure of getting out what you put in, plus the interest. In a mutual fund, there is no such guarantee, and as they say, "previous returns are no measure of future prospects". It's fine to have the money in mutual funds (we have lots of our money in non-prinicpal protected investments), but you do have to be aware of the risks involved. So you really can't compare the two returns as though they are equal in risk.

Risk equals returns. The higher the risk of loss of capital, the better return you may be able to get. The lower the risk of loss of capital, the lower return you can expect. Investments have to pay you more if they are subject to risk, or no one would put their money there.

So that's fine, just know what you're doing, and the fact that you are taking money from a risk-free investment and putting it into something where your principal is at least somewhat at risk.

Make decisions based on how long it will be before you need the money (you don't want money you may need within a few years in stock mutual funds for instance, since you may need to pull out that money during a down period in the markets).

In an IRA, if you have quite a long time frame until retirement, the mutual fund may well be the best place for the money, but don't compare the two returns as though the investments were equal, because they aren't. In one your principal (orginal amount of money plus interest earned) is safe, in the other, your principal (and the returns) will be subject to market conditions, the economy, and a host of other things, and there is no guarantee that you won't lose returns and even a portion of your original investment, although if markets are doing well, you will also have the prospect of better returns than would be possible in a safer investment.

[ljevtich]

Just so you know, the 30 year bond is being auctioned on Thursday, and the going rate is 4.75%. I figure I will probably pay a little more for the bond this time around, but 4.75% is pretty good. Of course, I plan on keeping it through its term, therefore the rate may not seem all that great. However, we figured our rate of inflation at negative 4%, so it will be as though we are earning 8.75%! How is that for a great rate?

[frugal-one]

I just checked Morningstar and it say the Wellesley mutual fund at Vanguard has a minimum investment of $50,000.

[loosechickens]

those minimums are usually for new accounts, and once you have that mutual fund in your portfolio, you can add to it in much smaller amounts.

[Spartana]

It use to be that you could transfer (tax free) money from a matured EE Saving Bond to an "H" or "HH" saving bond and continue to grow interest on it. Don't know if you can still do that or not. Also, banks will cash them and won't charge any fee, and they are free from state income tax so only need to pay fed tax on them. And if they are still earning interest, the interest is accured every month but only added to the bond every six month (2 times a year) so cash them after that or you'll lose 6 months worth of interest on them.