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Savings Bonds
Savings Bonds are an excellent financial tool to use for your retirement planning and wealth protection. Whether you use them exclusively or combine them with other financial tools, Saving Bonds can play an important role in making sure your retirement nest egg is not vaporized in a national financial crisis like the one in 2008 - 2009, and that your retirement money is always there for you.

The United States Savings Bonds program was implemented in 1941. For the last six decades it has been used by Americans who like to invest safely. Today, 55 million Americans hold U.S. Savings Bonds. However, as common and widespread as U.S. Savings Bonds are, they are among the most misunderstood of all investments. It has been my pleasure to help clients protect their wealth and plan for retirement with Savings Bonds as one of their financial tools.

My clients appreciate that I help them:

- Stay up to date on the current value of each savings bond
- Know what interest rates their bonds are earning
- Understand any bond-holder obligations
- Know when their bonds stop paying interest and what their options are when that happens

Following are some frequently asked questions that will help you better understand U.S. Savings Bonds and their role in retirement planning and wealth protection:

Q. My parents left me some Savings Bonds in their will, but I do not know the best thing to do with them?

A. I've seen this happen many times. The biggest mistake is letting the bonds sit around for 20 years before deciding to find out if they're worth anything. Once they expire the interest income must be reported in the year of maturity even if the bonds have not been redeemed. It would be my pleasure to analyze your Savings Bonds to determine their worth and the best financial move going forward.

Q. What kind of interest rates do Savings Bonds have?

A. There are many different interest rates in effect for U.S. Savings Bonds. Your financial goals will determine which Savings Bonds will be best for you.

Q. If I decide to purchase U.S. Savings Bonds, what are some of the nuances I should be aware of?

A. As with any financial tool, you either need to become an expert in that area or hire someone you trust to be your guide. The common mistakes a Savings Bond owner wants to avoid are:

- Holding Savings Bonds too long
- Failing to report interest when bonds mature
- Redeeming bonds at the wrong time
- Failing to avoid probate by not naming a beneficiary or putting bonds in your trust
- Cashing in too many bonds at once, resulting in higher taxes
- Cashing bonds that are paying high interest rates rather than other bonds you may hold

Q. What are the most important things I should know about U.S. Savings Bonds?

- All savings bonds are NOT created equal.
- EE bonds are purchased at 1/2 face value, I bonds at 100% of face value.
- Bonds must be held for at least 12 months before cashing in. (** Bonds issued prior to Feb 2003, only require a 6 month waiting period.)
- When you buy, and the series you buy, determines performance and rules for bonds.
- Interest on bonds is subject to federal tax upon redemption, bonds are always 100% exempt from state and local taxes.
- May 1997 (and after) EE bonds and all I series bonds increase in value monthly; interest com-pounded semi-annually, 3-month interest penalty if cashed in prior to 5 years old.
- Bond values remain the same throughout the month; buy late, sell early (in month).
- Current interest rates tell how a bond is currently performing.
- Yield to Date: Indicates performance since the bond was issued up until now.
- Bonds bought between May-October 1986 are poor performers; check rates.
- You can NOT use bonds for collateral (i.e. loan).

Q. What should I be aware of when cashing in bonds?

- Cashing bonds in should be based on interest rates and timing.
- Cashing in bonds "early" could forfeit hundreds of dollars of interest; check the "next int post" (next interest posting) column before cashing in.
- Banks use the social security number of the person who cashes in the bond for tax purposes; can be different from what's printed on bond; identification is required.
- A 1099-INT will be issued to the redeemer and the IRS for the "Total Interest" indicated (over $10) when redeeming bonds.
- Cash in "E" bonds that are no longer earning interest, but be sure to claim them in the year they came to final maturity to avoid possible taxation penalties.
- Co-owners listed on a bond have equal rights/cashing-in abilities as primary owner.
- Co-owners and beneficiaries listed on bonds should know if interest income was reported annu-ally; avoid double taxation on interest already reported by previous owner. Keep records of an-nual reporting amounts.

Q. Will the Treasury Department or bank advise me if a bond transaction will create a taxable event?

- No, they will not. That’s why you must know the rules to completely benefit from bonds.
- Changing primary ownership on a bond generally creates a taxable event to the original owner.
- Co-owners (upon death of primary owner) can add a new co-owner without creating a taxable event. Changing beneficiary to co-owner will not create a taxable event.
- You can choose to report interest annually or report total interest earned amount when cashing in; once reported annually, you must continue to do so until redemption.
- You cannot "give" your bonds to charity or sign them over to someone else.
- Lower income retirees cashing in a large amount of bonds in one year could result in a substan-tial amount of social security benefits to be taxable. Make sure you plan for a systematic cash-ing-in strategy.

For a no-cost phone consultation or a complimentary DVD called “Retain Your Gains”, feel free to call me at (239) 455-0027 or fill out this form.

John M. Carlson provides professional financial planning to include: Guaranteed Income Riders, Fixed Index Annuities, Tax-Free Income, Tax-Deferred Growth and Retirement Income Planning
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