Should you store savings bonds online?
If you put them in a drawer or even a safety-deposit box, they’re easily forgotten. The two savings bonds currently sold — EE and I — mature in 30 years. So, it’s easy to forget their whereabouts, and sometimes heirs can’t locate them. After all, billions of dollars in matured savings bonds, which don’t earn interest, haven’t been redeemed yet, according to the Treasury Department.
The best answer, say experts, is storing your savings bonds electronically via TreasuryDirect. Banks and brokerage firms aren’t an option. They can’t hold savings bonds.
“For investors, TreasuryDirect makes more sense for storage than having paper versions,” says Tom Adams, author of “Savings Bond Advisor,” who stores his savings bonds at TreasuryDirect. “People who’ve gotten them as gifts tend to forget about them. They go in a drawer or safety-deposit box and they’re out of sight.”
Adams admits that TreasuryDirect’s electronic storage program has a key downside though. Savings-bond holders don’t receive quarterly — or even yearly — statements, such as banks might issue. But he also believes there are some strong upsides. They include TreasuryDirect’s ease of use, solid security and no-fee purchases.
Joyce Harris, a spokeswoman with the Treasury’s Bureau of the Public Debt agrees. “With TreasuryDirect, there’s less chance of losing savings bonds,” she says. “They’re for anyone, any age. We don’t see any downside.”
Here’s a rundown of the pros and cons.
Rock-solid security. TreasuryDirect’s security system is much stronger than your bank’s, says Adams. Layers of protection include user names and passwords to input, along with security codes on a plastic card that the Treasury sends you. “Some people find the security hurdles difficult,” says Adams.
He adds that the site’s security is important: The Treasury doesn’t offer protection for unauthorized fund transfers. Conversely, banks do. So, the bank must insure your protection, adds Adams.
Ease of use. Savings bonds are bought and redeemed electronically at TreasuryDirect, unlike the paper versions bought at local banks. “It’s quite easy to invest and redeem there,” says Adams. “To redeem, just log onto your account and see what you want to sell. Then the money is sent to your bank account.” And there are no redemption limits, he adds.
Paper versions of savings bonds take more time to redeem. You have to go to the bank and prove who you are, says Adams, since the bonds are registered in your name. There are also redemption limits.
Buying through TreasuryDirect is easy, too. It’s just a matter of logging onto your account, where you can buy savings bonds 24/7. You can also gift savings bonds or transfer them. And there are no brokerage fees.
Lots of bells and whistles. Treasury spokeswoman Harris says that TreasuryDirect has many investor tools.
Savings bond data are logged onto the savings bond wizard, for example, that can be printed out and stored with other documents. “You input all the information and get back your bond interest and its value,” says Harris. “It also does a wonderful job tracking your holdings.”
Another helpful tool called Treasury Hunt helps you locate lost savings bonds. But there’s a caveat: You can only track down bonds that have matured and were issued after 1974. You can also convert your paper E savings bonds into electronic ones using the SmartExchange tool.
Harris adds that TreasuryDirect site is updated every two years. “We constantly streamline the site,” she says. “It’s easy to use.”
Don’t expect a mailed statement. Unlike banks or a brokerage firm, TreasuryDirect doesn’t send you a yearly paper statement listing your assets. The reason: The IRS gives you the option of reporting interest annually or deferring taxes until you cash in the bonds.
“Online you can get your annual tax forms,” says Adams. “But you won’t get paper statements.” This can be a big drawback, he says. “It’s possible to forget you have the account.”
The answer, counters Harris, is doing a thorough due diligence. “Your will should spell out where your assets are held,” she says.
However, your TreasuryDirect account can also include Treasuries, which helps organize your finances. You can print out the screen for your records.
“If you diversify too much, it can be complicated,” says Adams. “It’s handy to store your investments in two or three places, not dozens.” He recommends keeping Treasuries with TreasuryDirect and stocks with a brokerage firm.
No face-to-face contact. Forget walking into a Treasury office for help. Instead, you must call a toll-free number, where you talk to a Treasury representative. TreasuryDirect’s savings bond locator tells you which number to call. Adams doesn’t see this as a drawback, though. “More and more, money is electronic,” he says.
“Generally, I don’t see a downside to using TreasuryDirect,” says Adams. “It depends on how sophisticated people are with online banking.”