should I invest my EE savings bonds in to something else?

Question

My parents just passed me my Savings bonds they had purchased for me when I was a kid. They range back from 1988 to 1992. I don't want to spend them at all, but I was wondering if there was something better I could invest them in? Right now my interest rate is 4%.
Also, on my bond dated in 92, it says under "series EE" that "interest ceases 30 years from issue date". does that mean after 30 years they stop paying interest?

Answer 1

There are a couple of considerations that you have to make. 1. If you cash the bonds you will have to pay taxes on the interest. You will not have to pay state and local taxes, only federal taxes. Sort of the government giveth and the government taketh back.

4% however is pretty pathetic. Actually, almost criminal. If you have at least $2,000 worth of bonds and you do not mind the tax bite, historically an excellent alternative would be a good equity based mutual fund. One of my favorites is PENNX, marketed by Royce Funds. The long term average return is about 13%. When you compare that to the 4% there is just no comparison at all. Not only that but the 13% return is tax advantaged. That means that it is subject to a lower tax rate than the 4%. About 1/2 the rate. There are other excellent mutual funds to choose from also. Fidelity has many, also T Rowe Price and Vanguard.

If the amount is less than $2000, then your choices are less. All of those funds have about a $2000 minimum investment.

A family of funds that has only a $250 minimum investment is American Funds. They also have some excellent funds, but they all carry a 5.75% sales charge whereas the ones previously mentionded do not. But if you wish to invest only small amounts of money at a time, they are excellent choices.

All of these families of funds are on the internet and you can go to their web sites and check them out.

If it were me, I would take the tax hit and move the funds to one of those mutual funds especially PENNX.

Answer 2

You can probably get a better rate of return from something else so I'd say yes, cash them in and put them into another investment. ing is currently paying 4.5% interest on a standard savings account and there are many other places to invest.

You might want to consider a good index mutual fund.

Interest ceases means just that. They stop paying interest.

Go to the website below and read up on savings bonds. There's a lot of information there that can tell you exactly what you have.

Answer 3

Money market funds pay a better interest rate, at least 5%. You should also consider investing in stocks. Mutual fund companies have funds that track stock indexes, like the Standard and Poors 500. Over the long haul, maybe five years, you can expect to average a 10% rate of return.

Answer 4

Those (typically) are 30 year bonds, sometimes refered to as "long bonds". You should seek the advice of a CPA or CFP before taking action. Don't forget the possibility of tax implications on the inherited funds.

Answer 5

Yes it does. Hurt my grand parents badly. Dump them now. If have a few thousand open up an acct @ schwab.com & pick up some index funds in an IRA if don't have 1 or regular acct otherwise. If less stuck in bank until you can build up. Feel free to contact via answers if have enough to start @ schwab for more specifics.

Answer 6

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