Ask Terry Questions minimize federal taxes

minimize federal taxes

By Terry Savage on June 03, 2023 | Financial Planning / Retirement

Hello, Terry. I have $50,000 matured E savings bonds and have to take $15, 000 RMDs. I’d like to get some return when I cash the bonds. Any ideas on a way to do all of this for 2023 without giant federal taxes? (Is only the savings bonds interest taxable.) Thank you very much.

Terry Says

When you cash the savings bonds, you will get a huge interest bill. It’s taxable as ordinary income on your Federal return, but tax-free on your state return. The interest accrued over the years will be added on top of your other income — and it may push you into a higher tax bracket.

Your RMD is also taxable if it comes from a traditional 40l(k) or IRA. That amount is also added to your other income for the year.

You should consult an accountant right now to see if these estimated amounts will not only push you into a higher tax bracket, but impact the monthly cost of Medicare Part B premiums! Those go up as you have more income. You can’t avoid taking the RMD, but perhaps you can spread out the redemption of the savings bonds over a couple of years.

The law says redeem them at maturity, and the don’t earn any more interest after maturity, but many people don’t discover their matured bonds until much later. Spreading out the income could have a big impact on the tax bill and Medicare premiums.



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