Dear Dr. Don,
My 20-year-old son has many Series EE savings bonds, most of which have reached or are near full maturity. With the looming debt crisis, are they in danger of being unredeemable if the government defaults on the national debt? In other words, should they be cashed as soon as possible?
-- Chris Credit
Dear Chris,
Matured savings bonds have stopped earning interest and, if your son deferred paying income taxes on the interest earnings, the income tax is due in the tax year that the bond matured. There's no reason to hold on to these EE bonds, waiting for better days. Their best days are behind them.
For EE bonds that haven't reached final maturity, the federal debt limit crisis is a bump in the road -- not a fork. It's not a reason for your son to run down to the bank and cash in these securities before the government runs out of money.
What he should do is enter his EE bonds information into the government's Savings Bond Wizard. This will allow him to see the yield on the savings bonds since he's owned them as well as the current yield on the EE bonds. By comparing the current yields to what he can earn elsewhere, he'll be able to figure out if he's happy with the individual bonds as an investment or wants to cash them in and reinvest the proceeds in another investment, keeping in mind that he'll owe income taxes on the interest earnings.
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