What should I do with all these savings bonds?

[Anonymous]

My son has accumulated several thousand dollars worth of savings bonds that relatives have given him as gifts, toward college. Should I just leave them as savings bonds and cash them when he's ready to go? Or should I cash them now and put them in the 529 plan we have set up?

[Anonymous]

What are the bonds yielding and how long to maturity?

[Anonymous]

If they aren't yet mature, do not cash them. You will not get the face value. If they are mature and you think you can get a better return someplace else then I guess that would be your call. I had a bunch of bonds from gifts and I cashed them after I graduated from law school to help me with money to move out here, buy furniture, put down deposit on an apartment etc.

I would wait until they are mature at the very least to do anything with them.

[Anonymous]

If you use the savings bonds to pay for college, you won't have to pay taxes on the interest earned. To do that, you have to cash them in the same year you use the funds to pay for college. So you can just put them aside, and wait. more info here: http://www.treasurydirect.gov/indiv/planning/plan_education.htm

If you think you can earn a better return somewhere else, you can cash them in now, and put the funds into the 529 or wherever else you will get the better returns.

You can check on-line to see what the bonds are earning: http://www.treasurydirect.gov/BC/SBCPrice

[Anonymous]

Thanks!

[Anonymous]

Also, depending on what is already in/planned for the 529, he may want to use them for other adult purposes.
I paid closing costs on our first house entirely out of savings bonds from my early birthdays, baptism, etc.

[Anonymous]

At work in the late 1980s I was talked into buying bonds through payroll deductions. I just kept doing it for years not thinking about it.

When we needed IVF to have a child I cashed in $17,000 worth of bonds. We were successful!

[Anonymous]

Anonymous wrote:If you use the savings bonds to pay for college, you won't have to pay taxes on the interest earned. To do that, you have to cash them in the same year you use the funds to pay for college. So you can just put them aside, and wait. more info here: http://www.treasurydirect.gov/indiv/planning/plan_education.htm
If you think you can earn a better return somewhere else, you can cash them in now, and put the funds into the 529 or wherever else you will get the better returns.

You can check on-line to see what the bonds are earning: http://www.treasurydirect.gov/BC/SBCPrice

I was excited about that until I read the fine print. There is a pretty low income limit, and the bonds have to be issued in the parents name. Ours were all issued in the kids names.

We have a couple thousand $ for each kid with the accumulation of gifts over the years - I am going to give them to the kids. One is in college so debating whether to do it now or at graduation so she's got a little cushion.

[Anonymous]

If you look on the bottom of that first linked page, you can see some suggested strategies for the kids. The kids will likely have a lower tax bracket, and can cash them in without much tax consequence. And you have the option of the kids filing taxes and accounting for the unrealized annual gains and likely paying little or now taxes (depending on how much other passive and earned income they have - I think if passive is less than about $1900, they will be taxed at their own rates and not yours). But this will require keeping track of what's been claimed over the years so that when they do cash them they have the evidence that no taxes are owed.