Investing in savings bonds, which come in several varieties, can yield tax advantages.
What It's Worth
The value of a bond at any given time is equal to half of its face value plus the amount of monthly interest you've earned. The Treasury updates interest rates twice a year, in May and November. If you bought an EE Bond in July 2007 and you want to determine its value in July 2013, look up the interest rates for 2007 to 2013, calculate the interest earned for each of the 120 months you owned the bond and add the total interest to the bond's purchase price. If you prefer an electronic option, the U.S. Department of the Treasury offers a free online savings bond calculator.
You must keep a savings bond for at least a year after buying it. You can cash it in after that but you'll pay an early redemption penalty if you've owned the bond for less than five years, so it's better to hang onto it. The penalty is equal to the last three months of interest that you would otherwise have earned. The good news is that there are no penalties if you've owned a bond for more than five years. You'll receive the
full amount of accrued interest plus the amount you paid for the bond.
The Treasury provides a calculator on its website that will calculate the value of a bond for you. First, type the month and year of the valuation and select the type of bond (either EE, E or I) and its valuation. Next, enter the bond's serial number and its issue date. Then you can click on "Calculate" to display the information you entered and the interest earned, as well as the effective interest rate and value as of the date you entered. Click "Save" to save the information on your computer.
The Bond Wizard
The Treasury department also provides an installable program that lets you create and maintain a database of your bonds. It also updates the value of your portfolio at any given time. Download the Savings Bond Wizard and install it on your computer. After launching it, just enter the same information for each bond that you entered in the online calculator. Choose "File" and "Save" to save your new bond database to disk. The next time you run the program, choose "File" and "Open" to load your portfolio so you don't have to retype information about the bonds already in the database.
Category: Personal Finance