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Q: When is the best time to cash in a bond?

A: Did you ever hear the stock market expression, "Buy Low, Sell High"? If you own savings bonds you need to remember The Bond Consultant’s phrase, "Buy Late ...Sell Early" (As in early and late dates in a month). The reasons? Bonds earn interest from the first day of the month. So if you are planning on selling your bond, you probably would want to sell it on the first day that interest has been posted (or in which interest accrues), since you will not collect any more interest on that bond for the rest of the month. If you are planning on buying a bond, buy it late since you will earn the same amount of interest on a bond that was purchased on the first day of the month.

 

How You Can Lose Up To Six Months Worth of Interest

If you own bonds that were issued up to April 30, 1997, interest is only posted every six months. If you cash in one day premature, you could forfeit up to six months worth of interest. For example, if your bond was due to post interest on September 1, and you cashed it in on August 31, you would have lost the last six months worth of interest.

 

$150 Million Worth of Interest Is Lost on Savings Bonds Every Year!

How do I earn every dollar on my investment?

That is one the most overlooked issues by bond owners - who lose millions of dollars worth of interest every year because they cash in their bonds at the wrong time. Don’t be a victim. All of The Bond Consultant’s Products and Services indicate the date of the next interest posting for every bond in your portfolio. Whether you have one or one thousand bonds, by knowing the right dates, you will maximize your bond investments!

Q: What interest rate is used to calculate what bonds are worth?

 

A: The answer depends on when you purchased the bond. For clarification purposes, we have broken down the rules which applies based on the date issued (which appears on the front of the bond):

 

PRIOR TO NOVEMBER 1982: Bonds issued up to November 30, 1965, earn interest for up to 40 years. Any bonds issued in December 1965, or later, will earn interest for up to 30 years. If the bond (as well as savings notes) are still earning interest, it is based on the guaranteed minimum investment yields, or market based investment yields. The rates are both being calculated by the Treasury, then they best overall return is used.

 

NOVEMBER 1982 through APRIL 1995: Bonds issued prior to March 1993 are earning guaranteed rates which have increased gradually during the initial five year period of issuance. Bonds issued from March 1993, through April 1995 earn a 4% guaranteed interest rate for the first five years. When this bond goes beyond five years old, it earns interest based on market based investment yields, or guaranteed minimum interest yields. The Treasury will calculate the value of the bond based on these two elements, and give you the best overall return.

 

MAY 1995 THROUGH APRIL 1997: Bonds will earn interest based on market yields for Treasury Securities, through the original maturity period, or 17 years. Interest is posted to your bonds every six months based on the rates indicated below.

You will earn interest based on short term rates for the first five years of the average of six month Treasury yields, which is determined by the three months prior to May 1 and November 1 of each year.

From the fifth to the seventeenth year, the bond will earn the long term interest rate which is 85% of the average five year Treasury Security yields over the six months prior to May 1 and November 1)

 

MAY 1997 AND AFTER: EE bonds issued on May 1, 1997, and after, will earn interest based on 90% of the average yields on 5 year Treasury Securities for the preceding six months. The bonds will increase in value every month. The interest is compounded semi-annually and the rate will be posted to the bond for the 6 month earning period. Click here for information on the new Series "I" Bonds