Got matured (forgotten?) bonds
century? Put that money back to work!
Call them war bonds, call them
peace bonds, call them baby boomer bonds.
Whatever you call them, if you're holding any
of the $7.3 billion in matured Series E bonds, it's high time you
did something with them, because they aren't making you a dime in
The U.S. Treasury's Bureau of the Public Debt
launched a program in 2000 to alert sleepy bondholders to the "hidden
treasures" in their sock drawer or safe-deposit box.
The Bureau's alert applies to all 40-year Series
E bonds issued between May 1941 and July 1960, and all 30-year bonds
issued between December 1965 and July 1970.
Those 40-year E bonds were on sale through November
1965, and the 30-year ones through June 1980, so some of them will
mature every month for the next few years.
The Bureau's Web
site lists the matured Series E bonds and other bonds no longer
earning interest: Series H from June 1952 through July 1970, Savings
Notes from May 1967 through July 70, and all Series A, B, C, D,
F, G, J and K bonds.
Treasure in Series E bonds? Don't scoff, says Public Debt spokesman
"We're talking about 20 million individual
bonds, which is less than three-quarters of 1 percent of all of
the bonds that have matured, so 99.25 percent have been cashed in,"
he says. "The biggest chunk of that $7.3 billion is accrued
interest. Some of these people are sitting on bonds that are worth
up to 10 times as much as they paid for them."
For example, if you paid $75 for a $100 bond
back in April 1960, your bond could be worth $770 today.
What kept you?
Dan Pederson has two words for Treasury's public information blitz:
Pederson, author of Savings Bonds: When to
Hold, When to Fold and Everything In-Between, supervised the
savings bond division of the Federal Reserve Bank from 1986 to1990.
He left to start the Savings
Bond Informer, a company that provides customized reports for
bondholders who want to keep current on their holdings.
He's been after the bond program for years to
issue maturity bulletins.
"Since the 1941 savings bonds stopped earning
interest in 1981, they could have put out this bulletin any time
during the last decade," he says. "But if I gave you a
$7 billion loan interest-free and all you had to do was say nothing
about it in order to keep using it, what would you do?"
Nonetheless, he applauds the maturity bulletin.
"It's a good move on their part. It's long
overdue and it's important that the bond owners find out about it."
Cash 'em or roll 'em
If you are holding matured bonds, you have two options:
- Cash out: You may sell your bonds
at any bank or thrift, report your interest to the Internal Revenue
Service on a Form 1099, take your money and run, or:
- Roll them, if you qualify: If your
Series E bonds matured less than a year ago, you can roll them
into Series HH bonds. Advantage: It will give you up to 20 years
of additional deferral in reporting the interest you have already
accrued. Disadvantage: HH bonds only pay a flat 4 percent interest
rate the first decade and they kick interest payments to you every
six months that must be reported as interest income.
"The only way that an HH makes sense is
if you need a short-term deferral parking lot," says Pederson.
"Say you're in your last year of employment and you're in a
high income bracket right now that might drop after retirement.
You might want a short-term parking lot for a year or two, just
to get the deferral out there where you can take it when you have
"Ten years at 4 percent doesn't excite
me, but a year or two in order to maybe drop from a tax bracket
of 28 percent to 15 percent, that could have a significant impact."
A Sixties switch
The change in bond maturity terms in the mid-1960s resulted in the
sudden growth of the matured bond coffer. World War II war bonds,
peace bonds and Vietnam War-era baby boomer bonds through November
1965 earned interest for 40 years; after that, bonds matured in
"For the last five years, all the bonds
sold in the late Sixties have reached their final maturity. Most
bond owners assumed these were 40-year bonds; they don't realize
there was this time period where they switched over to 30-year bonds,"
says Pederson. "That's why this pot has grown. It was only
$2 billion back in 1995. It has grown over 300 percent in the past
According to Hollenbach, war bonds sold at slightly above-market interest
rates and were considered equal part patriotic gesture and sound investment.
In the Vietnam years, bond rates were generally competitive with savings
accounts. Bonds remained a popular investment vehicle, with $180 billion
The bonds they are a'changing
But times and bonds have changed, says Pederson.
"The backbone of the bond program over
the years has been payroll deduction; over half of their sales come
from payroll deduction. Back in the Sixties, you may have had one
or two options other than the payroll saving plan; now, you have
a cafeteria of 20 or more investment options, and even options within
those plans. Savings bonds certainly have a lot more competition
than they had 30 years ago."
Enter Treasury's Series I inflation-indexed
bond. The I bond rate is currently 4.08 percent --1.6 percent of
that is fixed. It is tax deferred.
Oh, and if you buy -- you might want to make
a note of the maturity date.
-- Updated: Nov. 6, 2002