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Smart savings bond strategies

By Jennie L. Phipps ·
Monday, June 24, 2013
Posted: 10 am ET

When my mother-in-law died two years ago, she left behind an inch-thick collection of small denomination U.S. savings bonds. She had begun buying them as a retirement hedge when she and her late husband were first married -- nearly 40 years before her death.

Many of the bonds were no longer paying interest, and none of them had current co-owners or beneficiaries, so they all had to go through probate, which slowed the distribution process among her heirs and reduced the value of the bonds because of probate-related fees.

If investing in savings bonds is part of your retirement planning, here are four steps to take to make sure that you and your heirs get the most out of your investment. The advice comes from Jackie Brahney of, a website that offers a savings bond calculator and other management tools.

Pay attention to maturity dates. Brahney says that bond owners sacrifice millions in interest annually because they hold on to bonds past the time when the security becomes payable and stops earning interest.

Make sure you have a beneficiary or co-owner. You can register the bonds in two ways. In either case, the bonds will pass to your heir without probate.

  • "John Smith Payable on Death (POD) to Jane Smith." Jane Smith is the beneficiary without rights to the bond until the owner dies.
  • "John Smith OR Jane Smith." Jane Smith is the co-owner and has equal rights to the bond.

Study up before you cash out. A bond's cash value varies. For instance, market conditions can make the security worth its full face value before its term even expires. Some savings bonds also have an "extended maturity period" when they continue to earn interest. Sell the wrong bond at the wrong time, and you'll lose out.

Consider taxes. One of the advantages of savings bonds is federal tax deferral, but when you finally redeem the bonds, you'll owe the Internal Revenue Service on all interest earnings, including the inflation adjustment on I bonds. If you redeem a stack of bonds, it could push you into a higher tax bracket, so sell strategically.  

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nanette vincent
July 10, 2013 at 4:38 pm

Don;t know why this reappeared. The question regarded tax consequences of I bonds which are POD.

Mrs. C. Weitz
June 28, 2013 at 11:23 pm

There are so many pages in this set up. Once I'm finished with one which was US saving bonds, series E=redemption values and interest earned amounts by denomination, I could never find it again. Then I worked on a sheet / calculator. God only knows where that is. I typed 7 or8 bonds on there and
that sheet is somewhere lost in the innards of the computer. How do I retrieve anything without a nervous breakdown. I've been
working on this for hours. Please help me. I'm really a nice sweet person, but this is getting beyond me. Help, Help, help.