Ask Terry Questions EE Savings Bonds

EE Savings Bonds

By Terry Savage on May 13, 2013 | Taxes & Economy

Hello Terry,
I am an 80 y.o. widow with a $19,000. annual income from SS & small pension , with a yearly RMD of approx. $8000. totaling $27,000.
I have tot. worth $40,000. in EE bonds , purchased in 10/1986. in increments of
$ 1,000.= ( now ea. worth $ 2008. ) that will mature ( 30 yrs ) in 2016.
For any reasons ( tax, etc. ) would I be wise to start cashing them out gradually as opposed to all at once upon maturity ?
Thank you for all of your helpful advice to so many of us Seniors !!!

SAVAGE SAYS: First, thanks for your nice comment. Second, don’t cash in these Savings Bonds before they reach final maturity. These old bonds have a very high “base rate” that is giving you a much better yield than you can get in a bank today. So that gives you three years till you have to think about it. Then, yes, you might cash them in over two — or even three — years, depending on that tax rates at that time. So in 2016, you will have to ask your accountant what the income tax rate levels are — and how much additional income you can take from selling the bonds before you move into a higher bracket.

You have to pay taxes on your Social Security in 2013 if you are filing as an individual and your income is over $25,000. That tax is determined by the amount of additional income.

Here’s a link to the 2013 tax brackets:? http://www.bankrate.com/finance/taxes/tax-brackets.aspx

Since you are single filer, in 2013 if your income pushed over $35,350, the additional income would be taxed at a 25% rate, not your current 15% rate.

BUT, all of this could change in 3 years!? For sure, you will need to get professional accounting advice when the time comes. But don’t cheat yourself out of the income you are earning on the bonds by cashing them in too soon!

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