Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Looking for suggestions on cashing in EE bonds
Old 10-07-2007, 02:32 AM   #1
Dryer sheet wannabe
GladToBeFree's Avatar
Join Date: Oct 2007
Posts: 22
Looking for suggestions on cashing in EE bonds

I have a rather large sum of money (large for me anyway) in EE savings bonds, a majority of which will stop paying interest in 2016. I have a couple of questions. First at what tax rate is interest on EE bonds assessed? I think it's your marginal tax rate but I can't find that info anywhere easily.

Second, there is (and will be) enough interest accrued that if we cash them in all at once, we'll push our agi so bloody high that the marginal tax rate would increase due to the phaseout of the deductions. Of course that assumes my I'm correctly answering my first question.

So my thinking is to start cashing these beasts in now, or near the end of the year when I can get a handle on what my agi will be.

Does that sound like a reasonable plan? Can anyone suggest an alternative. (Other than donating the bonds to a worthy cause, such as your retirement plan )


GladToBeFree is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-07-2007, 12:53 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
Join Date: Apr 2003
Location: Hooverville
Posts: 21,833
You have 8 or 9 more years of tax deferred interest coming to you. Also, some of these older EE bonds have very attractive terms and rates. Terms and rates that you could not match today.

It is not a totally easy thing to model, but I would take the time to make an Excel sheet that takes into account the likely extra tax should you cash in 2016, as compared to the interest you lose and the tax you will pay from now until then if you begin cashing now.

Remember, you could always start cashing in a few or a couple of years before maturity.


haha is offline   Reply With Quote
Old 10-07-2007, 01:45 PM   #3
Moderator Emeritus
Martha's Avatar
Join Date: Feb 2004
Location: minnesota
Posts: 13,211
What Ha said. And yes, the interest is taxed at ordinary income rates.

No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 10-07-2007, 02:05 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: May 2004
Posts: 10,895
You've probably thought of this, but just to be sure: Do you have educational expenses for yourself, your spouse, or your kids? Since the interest on the bonds isn't taxable if used for these expenses, cashing them to pay for these expenses would be an opportune way to save on taxes.
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 10-07-2007, 02:21 PM   #5
Recycles dryer sheets
Join Date: Aug 2007
Location: Midwest
Posts: 109
I have emergency funds in savings bonds. If I'm lucky enough to avoid emergencies before retirement, my plan is to delay Social Security and cash them in before starting.

Another thing to keep in mind is that savings bond interest is not subject to state income taxes.

Whether or not it's to your advantage to cash them in now or wait depends on your other circumstances. What they are now and what they will be in the coming years before the bonds mature.
Engineering My Finances Blog
EngineeringMyFinances is offline   Reply With Quote
Old 10-08-2007, 06:42 AM   #6
Dryer sheet wannabe
GladToBeFree's Avatar
Join Date: Oct 2007
Posts: 22
Thanks for all the comments. I'll address them all here.

As far as losing money, they are only paying 4 % and I'm pretty sure I can get at least that much in CDs. One of the reasons I wanted to start cashing them in rather than waiting is so I can start laddering CDs. I figured I could take about 10 bonds each year for 6 years and buy a 5 year CD with each of them. Or 12 for 5 years or . That way after 5 years about 20% of the CDs would be available for use or reinvestment. Perhaps I could keep one year in short term funds. Like EngineeringMyFinances, these bonds are my "in case of bad times" mad money. I really don't want to have over $100,000 to pay taxes on all at once.

As far as modeling various scenarios, there are too many unknowns. The CD rates could nosedive, making it a better deal to hold them until the end, the rates could jump up making it a better deal to dump them all now, maybe. Also with the dems likely to be in office soon, taxes are sure to go up and since a lot of my income is capital gains, I'll be in a higher bracket later down the road, since I have a hunch they will take aim at the cap gains and dividend cuts of recent years.

We have no kids and with both of us in our 60s, both with degrees, so education probably isn't an option for spending even though we did do an immersion Spanish class in Costa Rica.

EngineeringMyFinances brings up a good point. I hadn't thought of using that money to offset or delay SS. I can't do that now I've started collecting, but it would work for DW. Thanks for the tip.

Basically we don't need the money for income or spending. Our basic needs, housing, utilities, etc. except for food are covered by my SS and her pension. The additional income produced by our investments pays for entertainment, travel, toys etc. The biggest unmanageable expense is health insurance but that's about to get whacked significantly with DWs pension comes insurance coverage. We've been on Cobra followed by an extension of Cobra under DWs employer (state of GA).

I guess it doesn't matter what I do, I just hate the thought of giving uncle sam any more money than I have to. If I thought it was being spent wisely, it wouldn't be such a big deal.

GladToBeFree is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Going to NY - Suggestions welcome wildcat Other topics 18 05-21-2007 02:23 PM
Cashing out home equity to invest in Mutual Funds ADJ FIRE and Money 83 05-10-2007 12:16 PM
Cashing an old bond donheff FIRE and Money 4 12-07-2006 12:31 PM
Cashing in, Opting out moghopper Life after FIRE 0 08-28-2005 06:15 AM
Looking for suggestions lookindum Hi, I am... 45 08-22-2005 11:45 PM


All times are GMT -6. The time now is 11:06 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.