US Savings Bonds

Archive for April, 2009

Question: When you buy a United States Savings Bond, you…?

A. loan money to the government
B. borrow money from a savings and loan association
C. donate money for special government projects
D. pay for your child’s education

2. What was one reason the U.S. government started a Federal reserve system?
A. to keep the banking power of the US spread out among various districts
B. to make sure that US banks were obeying laws regarding banking
C. to have a place for banks to deposit their excess deposits
D. to provide consumers with access to funds for business expansion

Answer: aB

HEALTHCARE REFORM US Senator, Blanch Lincoln, Barbara Boxer, Chris Dodd, Ted Kaufman

Using Savings Bonds to find 529 plans or other college savings plans has become more and more popular among US Savings Bonds owners. This is because rollover over US Savings Bonds into a 529 plan or Coverdell educational savings account is tax free.

The benefits of using Savings Bonds to fund 529 plans

Once the US Savings Bonds have reached their maturity dates, redemption is a taxable event. However, if the owner of the US Savings Bonds redeem the bonds to pay for qualified higher educational expenses, he or she will not have to pay taxes for that amount. An alternative is to rollover the US Savings Bonds into a 529 plan or an educational IRA.

Rules for using Savings Bonds to fund 529 plans

There are rules to follow for using Savings Bonds to fund 529 plans. First of all the owner of the US savings bond must be 24 years old or older before the issue date of the US savings bond. There is also the adjusted gross income requirement which is indexed annually for inflation.

• Savings Bonds for Education
• Use U. S. savings bonds for 529 plan
• Coverdell Education Savings Account
• Series EE Savings Bonds

Question: What’s the Best Strategy for Series E Savings Bonds?

I own a number of Series E Savings Bonds which have reached full maturity and are no longer gaining interest. Is there a way of converting them to another type of Savings Bonds that gain interest without paying income tax? Or, is the only option to start redeeming them maybe late in the calendar year and early in the next calendar year to spread the tax burden over two years and invest the money into something else?

Answer: You used to be able to convert them to Series H bonds and get another 30 years of maturity. That ended in 2004. Since your bonds have stopped earning interest, cash them in whenever you need/want the money if taxes aren’t a problem, or redeem them over 2 years as you suggested.

RMR: Canadian Savings Bonds