Have a stack of old savings bonds? Learn how to cash those in with these simple steps

PennyWise: Personal Finance & Travel Tips

Did your grandparents give you savings bonds for high school graduation and you don't know what to do with them?

On the latest episode of PennyWise, host Nat Cardona talks with Chanelle Bessette of NerdWallet about the article: Ask a Nerd: How do I cash in a savings bond?

Nerdwallet explains how and where to cash in a savings bond, what documents you need to do so and how to check the value and see if it's worth it.

Before you run to the bank, make sure you do your homework.

About this program

Nat Cardona is host of PennyWise as well as Lee Enterprise's true-crime podcast Late Edition: Crime Beat Chronicles. Lee Enterprises produces many national, regional and sports podcasts. Learn more here.

Episode transcript

Note: The following transcript was created by Adobe Premiere and may contain misspellings and other inaccuracies as it was generated automatically:

Welcome to Pennywise, a Lee Enterprises podcast. I'm your host, Nat Cardona. Dust off your old savings bonds. It might just be time to give them another look. We have Nerdwallet personal finance writer Chanel Bessette with us today to guide us through the process of cashing in, saving smart, talking about the world of cashing savings bonds. It's usually one of those things you have a stack of.

If you're lucky enough, they're in an envelope. They're in a box and probably haven't been dusted off in a very long time. So what's the first thing you want to know when you grab them? Look at them and say, Hey, they're ready to be cashed? What do you do first?

The age of them definitely matters because once they're past a certain age, they've stopped earning interest. So you are potentially facing that opportunity cost of losing money by keeping them as paper. Paper bonds instead of cashing them. So looking at the age first and foremost is great. If you haven't looked at them in a long time, if you've had them for a long time, it is likely that you're not facing any kind of penalty by withdrawing early.

But that is something to consider if you did get a savings bond recently. So so let's say it's the former and that you do have that old savings bond. Cashing it out is going to be a great opportunity for you to have a little windfall or a big windfall, depending on how much the bond was. And then you can take that money and reinvested.

Use it for a purchase that you want to make or just use it to beef up your emergency bond and have it as liquid cash so that you can use it for more day to day conveniences and needs.

All right. And physically, when you're like, okay, this is good to go, these guys are ready to be cash. Do you go to your bank? Where do you go for this?

So it's important to reach out to the bank in advance to make sure that they can, in fact, cash it. Not all major banks do. So you want to maybe call around at first and make sure that you know which bank is actually going be able to accept it. If you have an electronic savings bond, then you'll go to the U.S. Treasury website and cash it there.

Okay. Quick question about the physical savings bonds. Ironically or coincidentally enough, my husband had found a stack of them literally a week ago. They were good to go. So we were like, okay. And didn't realize it kind of looks like a check on the back that you would endorse, fill in that kind of thing. I did read something on one of these Nerdwallet articles that you actually aren't supposed to fill that out before heading to the bank, correct?

Correct. Do you want to wait until you are at that moment of reimbursement? You probably want to follow along with whatever banker is working with you, whatever customer service rep is working with you to make sure that you are doing everything at the right time, at the right moment, because you don't want to accidentally create more problems for yourself with the with the process.

That'd be a big bummer. After waiting so damn long. Yes, exactly. So speaking of that, going into the physical bank branch, let's say you have your I.D. Do you need any other forms of I.D. to fear this is you on these savings bonds?

Yes. When you do go in, you need usually at least a couple of forms of ID. It's a good idea maybe to have your your state issued ID like a driver's license and maybe something like your Social Security card or passport. That way, you're you're genuinely confirming that you are who you say you are.

Right. And once you cash in those savings bonds, as we realized, you get a nice little form that you get to submit to the IRS when you have to pay your yearly taxes. What what other implications surrounding that on taxes that you need to know when it comes to cashing in savings bonds?

Right. So savings bonds actually are a lot like bank account in that way and that you do have to pay taxes on the interest that you've earned. A lot of people don't necessarily think about that usually, because always in the past, interest rates have been so low that you don't really have enough that to like really register by paying a lot of taxes on what I've earned.

But when it comes to a savings bond, that could be quite a bit of money if you've had it for decades. So it's important to make sure that you're taking that into consideration as your, you know, check cashing out that savings bond and making sure that you have that money set aside to pay Uncle Sam.

It all catches up to us eventually. Right. This is just maybe me thinking out loud here. Another thing we didn't realize about the savings bonds is, hey, aside from them being a valuable thing to have and keep safe your Social Security number, at least on the physical ones from 30 years ago, plus have your whole social on them, which I didn't realize.

And I think maybe not everybody realizes that.

Right? Yeah, it's kind of wild how we could be so at risk for something like that. That's such a official government documentation. Yes. So. So the physical security of your savings bonds is something to think about and consider. Hopefully your parents kept it in a safe place, maybe a security deposit box or in your safe at home or in some filing cabinet that is hard to know.

You know where exactly it is. People were not able to rifle through it and find your Social Security number just hanging out. So, yeah, when it comes to any kind of government documentation that could potentially put you at risk for some kind of identity theft or, you know, someone using your Social Security to open new accounts, it make sure that you are keeping it somewhere safe and away from prying eyes.

Lovely, lovely. Always good advice for multiple things, unfortunately. Speaking of these savings bonds and kind of being a thing of yesteryear when it came to anniversaries or birthdays, baptisms, other special events, where where do you savings bonds come in today's world? Is it a weird thing to give out nowadays, or is it actually coming back? Is it hot?

Yeah, you don't hear about it a ton, but you know a lot of older folks who are looking for a gift to give, maybe a new grandchild or a parent looking to give something to their child that's going to mature over the course of their young adulthood. You know, savings bond can still be something pretty, pretty great to get because it does help hedge against the rate of inflation and help you earn interest.

And it's perhaps a little less technical than having to manage a savings account for that long period of time. So being able to add that beneficiary or co-owner on the savings bond makes it pretty easy to transfer as a gift. And I would say the main difference these days, though, is that paper bonds are probably not as frequently used as electronic ones.

Electronic ones are also a little bit easier to cash. As I mentioned a moment ago, you can do it online and that's just the way the world has had it in a lot of different ways when it comes to finances is being able to just manage everything electronically. So that's probably how things are changed these days. But there are, of course, other options for setting up money for your child or grandchild.

You know, college savings accounts and things like that are also fairly common.

Aside from gift giving or out of the goodness of your heart when to give one of these out, would you suggest getting some of your own personal life or your own finance?

Hmm. That could be something doable, but something worth noting though. So. So keep in mind, I'm not a financial advisor when it comes to investments. This is just me as a personal finance writer. But when it comes to investing in savings, bonds do tend to pale in comparison to how mutual funds or other stock based investments do over a long enough period of time.

So if you're looking for something like investing and saving for retirement, that's where 41k comes into play. Or if you do want to do a college 529 investment for your child, you are likely to earn more interest than you potentially would with the savings bond on both savings bonds. There is the nice factor that is a guaranteed return, whereas saving in the stock market, you know it it could be volatile, especially in the short term.

So that's why you're thinking of the longer term investments. Stock market investing is definitely something to look for.

Okay. All important things to think of as you look at your finances. Is there anything else that you want to add about cashing in savings bonds, savings bonds in general in the year 2023?

Yeah. So savings bonds could be a solid part of a, you know, diversified portfolio for your finances. You know, there are all kinds of vehicles that you can use to set aside money in interest if you're looking at just a regular banking products right now, savings accounts, the answer certificates of deposit are earning relatively high interest rates compared to how they have been in recent years.

So you could look into that. You could look at a CD if you want to access that money sooner than you might think. On savings, bonds could be very long term and therefore less accessible and less liquid for things that you might need in the short to medium term. So just making sure you know what kind of options are available to you, what kind of rates you could potentially get.

And and of course, you know, your own tolerance for risk and how you like to manage your money. But it's definitely a worthwhile option if that's something that you think you would benefit from.

Beautiful. Sounds good. Thank you.

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