Savings Bonds – Series E is now officially dead.

Someplace or the other while I was on vacation for three weeks touring the Canadian Maritimes I caught note that the last Series E bond has stopped paying interest. (The vacation explains the hiatus of posts.) Series E bonds earned interest for thirty years and the last one was issued in June 1980. As of July 1, 2010 no Series E bonds are earning interest and since interest has stopped accumulating, any deferred income is now taxable regardless of whether you cash them in or not.

From a decades old memory I can picture my father mentioning that he had unearthed some Savings Bonds he bought during World War II only to discover they had stopped paying interest sometime in the past. Don’t be like him in this regard. Unless your tax advisor has a particular reason why you should hold onto these bonds, cash them in and, at a minimum, earn the pittance current money markets or bank accounts are paying. Furthermore, if you have a bunch of Series E bonds, it might be a good time to consider rebalancing your portfolio.

Savings Bonds and I go back a long way. Thankfully, my parents taught me saving from an early age. A portion of any money I earned went to buying Series E savings bonds. In a time when stores competed for business by giving bonus S & H Green Stamps you could redeem for catalog merchandise, you could buy Savings Bond stamps at twenty-five cents a pop and paste them into a Savings Bond book. When you had $18.75 of stamps you could cash the book in at your local bank for a Series E Savings Bond.

From a finance standpoint I would have been better off keeping all those twenty-five cents in a bank account earning interest until I accumulated the $18.75 rather than buy the Savings Bond on the installment plan, but at age twelve I didn’t understand the time-value-of-money concept.

Today we have two types of Savings Bonds available, Series EE and Series I. In the next few blogs I’ll discuss each type of bond and whether they make sense as a part of your portfolio.

Next up: Series EE Savings Bonds.

~ Jim