savings bonds
Savings Bond Exit Strategy - Phase Two    Share
by The Savings Bond Guru
Last month we talked about what an exit strategy is and some things you should consider before you purchase any savings bonds.
This month we will address what you should be aware of - in general terms - during the middle period of the lives of your savings bonds. This would be the period of years 10 - 20 of bond ownership.
First, you should know that series EE savings bonds issued after May of 2005 earn a very low fixed rate of interest for the first 20 years. Since the Treasury wants savings bond purchasers to invest for the long term, they reduced the interest rate until the 20th year. At that point in time, if the bond hasn't reached its face value (remember, series EE paper bonds are purchased at one-half their face value), the Treasury will make a one-time adjustment to bring it to its face value. This is an effective interest rate of 3.36%. And remember, the interest has been tax-deferred and compounded during this 20 year period.
So the message is clear and simple: If you can't hold onto these series EE bonds (issued after May 2005), for at least 20 years then don't invest in them at all. Once these series EE bonds reach their 21st year, the Treasury has reserved the right to change the interest rate. Since no series EE bonds (with this fixed interest rate, issued since May 2005), have reached their 20th year, we have no history about what the Treasury will do.
But at this point, you may or may not choose to redeem these EE bonds in their 21st year - or later - depending upon what the new interest rate might be at that time.
If you read the book Pay for College with Tax Free Earnings by Ted Franklin, (, you will see how these series EE bonds are perfect for avoiding the payment of income taxes on these bonds if they were purchased as part of a savings plan to build a tax free college fund.
Second, you should know that you can not change the beneficiary name, or a co-owner name, for any series I bond unless the name being replaced is either deceased or divorced from the primary owner. (Special conditions exist for savings bonds awarded to a spouse in a divorce action/settlement.). So hopefully, you carefully chose the right person(s) to be named either as a co-owner or beneficiary when you purchased the bonds.
But during this middle period of bond ownership, you should start to 'look ahead' as to what you want to happen to your bonds should you pass away before you cash them in. If someone previously named as either a co-owner or a beneficiary has passed away, or they are divorced from you, you can have that person's name replaced with a new name. The process is called reissuing and there is a specific form you need to use to get this done (the form is available on-line at But I urge you to review all of your savings bonds right now to be certain that the person(s) you want to become the sole owner of your savings bonds if you should pass away before cashing them in - is someone you specifically want to have them.
Future articles will deal with considering an exit strategy at the later stages in the life of your savings bonds.
Good luck and best wishes from the Savings Bond Guru,

Jack Quinn - CEO -
2022 Route 71 - Suite 200
Spring Lake Heights, NJ 07742

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