Cash in a bond early?

October 6, 2005 4:49 AM

I was given a $500 savings bond dated 7/27/05. Is there any way to cash it in today?
posted by UncleHornHead to Work & Money (17 answers total)

Nope: "There is a minimum holding period for savings bonds. Bonds purchased or issued on or after February 1, 2003 have a holding period of at least one year from the issue date."
posted by mojohand at 4:56 AM on October 6, 2005

Just a thought: can you sell it to someone for $450?
posted by Leon at 5:44 AM on October 6, 2005

Just a thought: can you sell it to someone for $450?

You could if you wanted to be a real jerk. After taxes that bond won't pull in $450.
posted by Pollomacho at 5:54 AM on October 6, 2005

I refer you to this page for more info:

http://www.publicdebt.treas.gov/sav/savinvst.htm

It will be worth $500 dollars at one point but at the earliest time you can cash it in, 1 year, there is a penalty of 3 months interest accrued. (12 -3=9 months of interest).

It should have your name printed on it so re-selling it is tricky at best, illegal at worst.
posted by Dagobert at 6:12 AM on October 6, 2005

you have to hold it for a year ... it will say on the bond ... after that you can sell it by taking it to a bank ... but you won't get face value ... furthermore, you'll have to report the money you get as income on your taxes as the bank will report the transaction to the irs

in a few years, depending on the bond, it'll actually be worth 500 bucks ... but i wouldn't bet on that 500 bucks being worth the money you could get for it in a year
posted by pyramid termite at 6:43 AM on October 6, 2005

The only person who can cash the bond is the person whose name is on it, so it's impossible to sell outright. One way you could sort of "sell" it, however, is to use it as leverage to get a loan from a friend. The bond can't be used as collateral because the lender has no way to cash it. However, you could promise to pay the lender back when you cash the bond in 1 yr, and the lender would have to take your word for it.
posted by blue mustard at 6:46 AM on October 6, 2005

I'll assume that it's a series EE bond, which are the most common.

In that case, the buyer paid $250 for the piece of paper you now have. You can't redeem it until a year has passed. You'll forfeit 3 months interest if you redeem it before five years. The rate is 3.42% for your bond. The bonds normally go up in value every six months, on the first day of the month of issue and six months later. So basically, if you redeem it July 1, 2007, you get two years interest (minus three months), but if you redeem it June 30, 2007, one day earlier, you get 1.5 years interest (minus three months).

Nutshell: you can redeem it around July 27, 2006 (or perhaps as early as July 1, 2006 - ask your bank) for nine months interest at 3.42% on a base amount of $250, or roughly $256.41.

You can't sell it to anyone, or do much of anything to get that money earlier. Sorry. Enjoy your birthday present! :)
posted by jellicle at 7:55 AM on October 6, 2005

The bond cannot be sold for a year after the issue date; you will have to wait until 7/27/2006. The interest from the bond is taxable. Even with the three month interest penalty, you should get a little more than $500 when you cash the bond in. At least, that has been my experience. PT is wrong about the face value taking a few years to accumulate. The bond is worth more than face value after a year, though it may technically be worth a little less after a year due to inflation. The bank will hand you more than $500 when you cash it in next year, guaranteed. If your name is on the bond then you are the only one who can cash it in.
posted by KrustyKlingon at 8:01 AM on October 6, 2005

I'm pretty sure KrustyKlingon is mistaken, as whoever bought the bond paid $250 for it, and if it could be worth more than twice that in a year then everyone would put their money in bonds.
posted by drezdn at 8:10 AM on October 6, 2005

Looking at the Wikipedia entry, if it's a Series I bond then it will be worth at least face value. I'd be willing to bet good money that it's Series EE though.
posted by drezdn at 8:14 AM on October 6, 2005

Umm, to reiterate, in response to some wrong information above: series EE bonds are purchased at one-half of face value. The $500 number is a fiction; you have a piece of paper worth $250 + interest, not $500 + interest. Pyramid termite is correct and KrustyKlingon is worng, at least in regard to EE bonds.

Klingon is probably thinking about I series bonds (see my link), but I don't think those are common for gift-giving.

There are also HH income bonds that are sold and redeemed for face value, but which pay interest regularly. These are much less common for gift-giving because of the additional "hassle factor" of receiving interim interest payments.
posted by jellicle at 8:19 AM on October 6, 2005

I have $250 in Series EE savings bonds which I received in May 1991. Fourteen and a half years later, they are worth about $275.00.
posted by gnomeloaf at 8:48 AM on October 6, 2005

That's surely incorrect, gnomeloaf. This calculator indicates you've earned over $300 (i.e. your bond is worth over $550) after 14 years at 4% interest
posted by mojohand at 9:42 AM on October 6, 2005

mojohand, you're assuming they're $500 face value rather than $250. If they're $250 face value, they are worth exactly $275.10 at the moment.
posted by smackfu at 10:24 AM on October 6, 2005

Oh for Pete's sake! The smooth division of 275 into 550 might have been a clue for the clueless. I'm going to sit in the corner and be quiet now.
posted by mojohand at 10:47 AM on October 6, 2005

Mojohand - face value of my bonds is $250.00 which means that back in 1991, whomever bought them paid $125.00 and they are now worth $275.10.
posted by gnomeloaf at 1:40 PM on October 6, 2005

Why are series EE bonds purchased at half face value? Is it because after 10 years they'll have an actual value equal to the face value?
posted by breath at 4:21 PM on October 6, 2005