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Old 02-16-2015, 01:40 PM   #21
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How about just giving the new kid a crisp, new $100 bill?
Quite frankly, that's what I would do in these days of ultra low interest rates. DD's godmother gave her savings bonds every year as a birthday gift until she was in college. I was very grateful for the thought, which IMO greatly exceeds what should be expected from a godmother, but thought with dismay that savings bonds had no chance of growing as fast as rapidly increasing college costs.

Back when I bought my savings bonds, it was different. I bought a total of $25,000 back when they had a guaranteed 6% minimum interest rate. That relatively generous interest rate, plus the ability to cash them in tax free by investing the proceeds in 529 plans, made those savings bonds easily the best low risk investment I've ever made. The initial $25,000 investment, plus the savings bond interest, plus the growth of the investments in the 529 plan, have been enough to fully fund two college educations at public institutions. There may be people who have done even better, but I personally am not aware of anybody who has funded their children's college costs more effortlessly.

Sadly, those days are over. Savings bonds, with the possible exception of I-bonds, are no longer a sensible option for long term college savings.
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Old 02-16-2015, 01:58 PM   #22
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Oh, one other thing. The 529 contributions qualified us for a credit on our state taxes every year since 2003. We paid 0% Federal tax on that initial $25,000 investment and got credits that were worth many, many thousands of dollars off state taxes. It makes me smile every time I think about how great a decision it was to put that money into savings bonds. I wish all of my investment decisions had turned out as well.
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Old 02-16-2015, 02:04 PM   #23
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When my first grandson was born, I bought him a paper I Bond. By the time grandson # 2 came along, and granddaughter # 1, paper bonds were gone. I did buy each of them an electronic I Bond, but I have to admit it's just not the same, emotionally.
My plan was to buy more Bonds at each of their birthdays, but forwarding an email with the Bond information is just a bit too cold. So, I'll look at other more tangible options - like crisp bills.
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Old 02-16-2015, 02:08 PM   #24
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+1 on the 529 account. If I expected to be making additional contributions, I'd set one up myself with niece as beneficiary (then I'd get the state tax deduction). While the law allows the beneficiary to be changed (say, if niece chooses not to go to college/trade school, etc), if these were gifts to her, I'd just cash them out, give the $$ to her and take the tax hit in that case. If this is a one-time thing, maybe "ask" (suggest) if niece's parents had set up such an account and just make a contribution. Send a card either way. The investment options vary, but many states offer low-cost index funds or target-date funds that get more conservative as the anticipated year of use gets closer.

I wouldn't do savings bonds--just too much of a PITA.
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Old 02-16-2015, 02:12 PM   #25
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X3, 529 is what I would do. You may even get a tax break from your state on the 529 deposit (good for you) and it grows like a Roth for your niece with tax free withdrawals for education expenses (good for her).
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Old 02-16-2015, 02:54 PM   #26
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Just make sure you find a 529 plan that doesn't charge an annual maintenance fee until the account reaches some minimum balance. Vanguard's 529 plan charges a $20 annual fee on accounts under $3,000 and I'm sure others do too. But you might be able to find one that has low costs, even on small accounts.

I've had a good experience with 529 plans, but I personally would hesitate to open one just for a small gift. You're tying up the money for many years and committing it to a specific use when the amount simply isn't going to make that much difference to the new baby's financial future.
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Old 02-16-2015, 03:09 PM   #27
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How about just giving the new kid a crisp, new $100 bill?
Never been around a toddler, eh? She'll just eat it. And what kind of financial example would that be?
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Old 02-16-2015, 03:16 PM   #28
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Never been around a toddler, eh? She'll just eat it. And what kind of financial example would that be?
Exactly. And if you give it to her folks, they'll spend it on diapers or baby clothes. At least the savings bond doesn't mature for a couple of decades.

+2 on the 529.
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Old 02-16-2015, 03:55 PM   #29
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Never been around a toddler, eh? She'll just eat it. And what kind of financial example would that be?
+1
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Old 02-16-2015, 04:05 PM   #30
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Yes, but you need to look up each and every one, and type in a long serial number and date. If you have three kids and they get one at a holiday and birthday for 16 years, that's a relatively lot of book-keeping for relatively small amounts of money.

Nowadays especially, the broker tracks cost basis, so that's not an issue for a mutual fund, even with reinvestment of any distributions.

-ERD50
They have a program called savings bond wizard you can download that keep track of all that info... and will update to current balances etc.... will even keep track of the bonds you have retired...



As for bonds... I would not do it... interest is just way too low... I turned in all my bonds that did not have a 4% minimum rate.... my mom is holding onto some that are earning 1.4%... but the are payable to grandkids and great grandkids when she passes.... so she will not turn them in...
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Old 02-16-2015, 04:11 PM   #31
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I am going to do a bit of thread jack...

People have mentioned you can cash out savings bonds and put the money into a 529.... can you do that tax free Is there a income limitation on doing it

I would rather have the funds in the 529 than the savings bonds....
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Old 02-16-2015, 04:58 PM   #32
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+3 on the 529. We do this for our nephews instead of birthday and Christmas gifts. We get a nice tax deduction, and since we began at birth, the $$$ is adding up. I print off their statement and enclose it in their birthday and Christmas cards so they can see how much we've contributed, and how much it's grown (or shrunk). They think they're rich. I'm hoping what we've given them will pay for at least a semester when the time comes.
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Old 02-16-2015, 05:53 PM   #33
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I am going to do a bit of thread jack...

People have mentioned you can cash out savings bonds and put the money into a 529.... can you do that tax free Is there a income limitation on doing it

I would rather have the funds in the 529 than the savings bonds....
See Publication 970 (2014), Tax Benefits for Education

If you meet certain conditions spelled out in the reference, you can exempt the interest on savings bonds from federal taxation. Notice that one of the required uses for the money is to fund a QTP (529) plan.
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Old 02-16-2015, 05:58 PM   #34
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They have a program called savings bond wizard you can download that keep track of all that info... and will update to current balances etc.... will even keep track of the bonds you have retired...
Yes, I know. An entry for each and every one. It's not the end of the world, but it's tedious compared to one fund, one cost basis, one NAV.

-ERD50
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Old 02-16-2015, 06:36 PM   #35
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Yes, I know. An entry for each and every one. It's not the end of the world, but it's tedious compared to one fund, one cost basis, one NAV.

-ERD50
I entered in my bonds one time about seven years ago. Just minor updates once a year. Just don't lose your database file!
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Old 02-16-2015, 08:16 PM   #36
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Yes, I know. An entry for each and every one. It's not the end of the world, but it's tedious compared to one fund, one cost basis, one NAV.

-ERD50

Except for all those pesky reinvested dividends.... especially on a bond or MM fund... then you do have a separate basis and holding period for each...
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Old 02-16-2015, 08:27 PM   #37
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Except for all those pesky reinvested dividends.... especially on a bond or MM fund... then you do have a separate basis and holding period for each...
Not any more. The broker takes care of all that for you.

In the past, I specifically have not auto-reinvested dividends. If I wanted I would lump them and do it at one time, where I want. If you aren't careful, you could inadvertently even create a wash sale, and more paperwork.

But those aren't really issues for a fund that is expected to be held for many years for college expenses or something. Just re-invest, let the broker track the cost basis, and maybe stop re-investing a year before the first withdrawals are expected so everything is long term.

-ERD50
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Old 02-17-2015, 09:42 AM   #38
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Never been around a toddler, eh? She'll just eat it. And what kind of financial example would that be?
Here's a gifting idea I tried that went sour...

Nephew graduated college and I suspected he might blow the money if it were in his pocket, so I decided I'd open a Roth account for him (I knew he had earned income). But me opening the account got to be a PITA, with all of the personal information (SSN , drivers licence, etc). So I just made the check out to Charles Schwab (or whatever) and then put "FBO (my nephews name)". I handed it to him with the application already filled out as far as I could. But he took his stack of graduation checks to the bank, include the "Chuck" check, and the bank accepted the check! I'm not sure what he bought with it, but he's not got a Roth account. It would have turned out a lot better for later college graduation neices and nephews if he had stuck to the plan. Fool me once...
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Old 02-17-2015, 10:31 AM   #39
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Not any more. The broker takes care of all that for you.

In the past, I specifically have not auto-reinvested dividends. If I wanted I would lump them and do it at one time, where I want. If you aren't careful, you could inadvertently even create a wash sale, and more paperwork.

But those aren't really issues for a fund that is expected to be held for many years for college expenses or something. Just re-invest, let the broker track the cost basis, and maybe stop re-investing a year before the first withdrawals are expected so everything is long term.

-ERD50

Then would not Treasury Direct keep track of all your individual savings bonds today I really do not know, but think that since they have all your info it would be easy....

If spent for college there is not tax so you really do not have to worry about long term or short term.... just make sure you do not take out too much money....

I just changed where my dividends go with my bond funds.... I was always getting wash sales for every sale that I did since they would reinvest at the end of every month... now just have the money go to my checking and will just spend it...
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Old 02-17-2015, 10:54 AM   #40
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One thing I found was a PITA was tracking individual Savings Bonds in Quicken. Any report on holdings would list all individual bonds. Much easier to track individually in Savings Bond Wizard and track as a bond fund in Quicken.
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