Savings Bond For New Niece?

[karluk]

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.

 

[harley]

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?

 

[MichaelB]

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.

 

[Hermit]

Never been around a toddler, eh? She'll just eat it. And what kind of financial example would that be?

+1

 

[Texas Proud]

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...

 

[Texas Proud]

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....

 

[SumDay]

+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.

 

[RE2Boys]

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.

 

[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...

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

 

[RE2Boys]

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!

 

[Texas Proud]

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...

 

[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...

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

 

[sengsational]

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...

 

[Texas Proud]

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...

 

[Hermit]

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.

 

[Dog]

Thanks all for the feedback and information. My nephew is going to discuss with his wife and let me know which direction they would like to go. He was very appreciative of me just planting the seed in regards to starting a savings plan for their baby


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