Last updated on September 3rd, 2022 at 10:26 pm
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Some people have invested in savings bonds because they are a low-risk investment with a specified rate of return. This type of investment enables you to more easily plan for retirement and to accomplish other goals. However, you must know how to cash savings bonds if you want to turn a profit on your investment. There are numerous ways to redeem these bonds, and you may find that some options are more convenient than others.
You Can Cash Savings Bonds With These Tips
Understanding how to cash savings bonds as well as when to cash them can play a major role in your overall return on investment. With this in mind, here is a closer look at how to cash savings bonds.
1. Gather All Paper Bonds in One Convenient, Secure Location
Until recently, the U.S. Treasury Department only issued paper bonds. Many people still have numerous paper bonds in their possession. These bonds may grow at a steady rate for decades. However, they will not increase in value beyond the maturity date.
With this in mind, it is wise to begin the cashing out process by gathering all of your paper documents together in one location. These bonds are only redeemable if you present the original certificate. Therefore, take steps to preserve the documents.
2. Create a Spreadsheet Showing Maturity Dates for Each Bond
With multiple savings bonds, learning how to cash savings bonds may start with the creation of a spreadsheet that itemizes each one, its amount and maturity date. By taking this step, you will only have to review your spreadsheet regularly rather than sift through paper documents you are trying to preserve. It may be best to organize the entries in your spreadsheet by the maturity date for even easier management.
3. Monitor Maturity Dates Periodically
You do not want to sit on savings bonds long after they mature. This is because the value of these assets is no longer increasing at that point. Therefore, monitor your bonds’ maturity dates regularly so that you can act on their redemption as soon as they mature.
The frequency of this effort may vary based on how many bonds you have. For example, if you have dozens of bonds, it may be advantageous to review the maturity dates every month or two. If you have only a couple of bonds, reviewing the maturity dates every six to nine months may be more reasonable.
4. Continue to Invest in New Bonds Regularly
While you may want to know how to cash savings bonds now, you also need to plan ahead for future profits from additional investments. Some people create a bond ladder, and this is accomplished by purchasing bonds on a regular schedule over a period of years.
For example, every two to three weeks, you may have a new bond mature. This is a great way to generate a reliable stream of income in retirement. You can easily adjust your finances to take full advantage of this type of investment strategy today.
5. Find Banks That Accept Paper Bands
When you need to know how to cash savings bonds printed on paper, you must find banks that accept these. It may be wise to call around to a few banks to explore your options. The location of the bank and its hours of operation may make one bank more beneficial for you to use for this purpose than another one. In addition, some banks only redeem smaller bonds up to a specific dollar limit.
6. Gather Required Identification Documentation
Each bank has a different method for verifying your identity when you cash in a bond. If you are an established account holder with the bank, you may only need to prove that you are an existing customer. If you are not, you may need to provide a valid government-issued form of ID, such as a driver’s license.
Keep in mind that you can also cash in paper bonds by mailing the bonds with your proof of identification and direct deposit information to the Treasury Department. Remember that these bonds are non-transferrable. Only the person named on the certificate may redeem them. Otherwise, you need to show proof that you are the rightful heir in the event of death.
7. Consider Transferring Paper Bonds to Electronic Bonds
Another option available when you need to know how to cash savings bonds is to convert your paper bonds to electronic bonds. This process is easy to do, and it will enable you to redeem your bonds online rather than having to physically take them into a bank or mail them to the Treasury Department. This step can help you to better manage your bonds as well as redeem them for cash more easily.
8. Create an Account for Electronic Bonds Online
Through the Treasury Department’s website, you can create an account within a matter of minutes. When you do this, you can easily review all of the details of your existing electronic bonds. You can also convert paper bonds to electronic bonds and redeem electronic bonds for cash immediately.
You can also buy new electronic bonds. As part of the account creation process, you will need to link a checking or savings account to your Treasury Department account and verify your identity.
Bonus read – 7 Best Savings Accounts in 2017
9. Redeem Your Electronic Bonds Online
Redeeming electronic bonds online through the Treasury Department’s website is easy to do. Once your account is active, you can select as many as 50 bonds to redeem within a single transaction. You can then decide if you want to transfer these funds to your linked bank account or if you want to re-invest the funds by purchasing new savings bonds.
10. Monitor Your Tax Liability
Savings bonds are purchased with post-tax income, but the interest that the bonds generate has not yet been taxed. This means that you will need to pay taxes on the interest income from your savings bonds. If you are only redeeming a single and rather small savings bond, this may not affect your tax liability substantially. However, if you are redeeming many bonds with larger amounts, you may need to monitor your tax liability so that you can afford to pay your tax bill.
If you are only redeeming a single and rather small savings bond, this may not affect your tax liability substantially. However, if you are redeeming many bonds with larger amounts, you may need to monitor your tax liability so that you can afford to pay your tax bill.
When you want to know how to cash savings bonds, you can see that there are several options to consider. Some options, such as physically monitoring your paper bonds, require more time and effort. While other options, such as tracking maturity dates of electronic bonds, do not. Because it is important to monitor maturity dates, it may make sense to convert all existing paper bonds into electronic bonds as a starting point. Then, you can more quickly and easily redeem your bonds when the time comes to do so.