How to Get the Most Out of Savings Bonds
If you have a savings bond, uncertain times or economic hardship may have you wondering if you should cash it in. While the answer varies depending on your financial situation, there are a few general factors to consider to maximize your return. Yusuf Abugideiri shared his thoughts on how to get the most our of savings bonds with NextAdvisor Staff Writer, Alex Gailey.
How to Get the Most Out of Savings Bonds
An excerpt from the article How to Take Advantage of Savings Bonds Right Now is below:
Because savings bonds traditionally have low returns, Yusuf Abugideiri, partner and senior financial planner at Yeske Buie, a financial advising firm with locations in San Francisco and Washington, D.C., recommends holding onto a savings bond until maturity to get the full return. This is especially the case for Series EE bonds since the Treasury promises to double any investment once they’ve reached 20 years of maturity.
“You’ll get more out of a savings bond if you’re receiving interest over the full term, rather than cashing it out before maturity,” Abugideiri said. “Once you get past five years, you won’t have to pay any penalties, but you haven’t received all of the interest you could earn.”
So, if you buy Series EE bonds, it’s best to plan to hold onto them for the full 20-year period if you can.
If you do decide to redeem your savings bond early, Abugideiri says there’s the option to take that money and invest it in other ways to earn more down the line. “If you cash out with no penalty, take the interest you got up to that point, and put that money to work in a different way, then that might be a way to further increase your returns,” Abugideiri said.
When to Cash In a Savings Bond
An excerpt from the article In a Pandemic Economy, Is It Time to Cash in Your Savings Bond? is below:
The decision to cash in a savings bond is a no-brainer if it’s stopped earning interest. But depending on your current financial situation, cashing in your savings bond early may be an option to consider.
If you need cash right now, Yusuf Abugideiri, partner and senior financial planner at Yeske Buie, a financial advising firm with locations in San Francisco and Washington, D.C., says redeeming a savings bond is preferable over creating debt.
“While you would be paying a fee for redeeming your savings bond early, it’s a one-time cost” compared to the recurring cost of interest on a credit card or personal loan,” says Abugideiri.
It’s always wise to do some homework on your savings bond before cashing it in. You can calculate the current value of a savings bond using the Treasury’s online calculator. Bonds can be cashed in early starting at the one-year mark for their current value. However, you’ll lose three months’ worth of interest if you cash in before five years have elapsed.
Read more on savings bonds on the NextAdvisor website: