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Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: What to do with savings bond $$$$ Date: 12/17/1999 11:08 PM
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I have been Foolish for some years and am (I believe) properly prepared with equity investments for my approaching retirement. However, my partner was NOT an investor and has 15 $10,000 series E bonds which right now have a total value of $270,000. He has perhaps 10 years until retirement. Cashing even one of these bonds would be a big tax hit since each is currently worth $18,000. What would be a Foolish course of action for us?

I usually am able to fight the impulse to be "picky" -- but am going to take a chance here. (None of this is meant to sound snooty or superior -- just frank.)

These couldn't really be "Series E" bonds, or they would all have been purchased prior to July, 1980, and would be worth at least $29,492 each -- for a total of over $442,000. So they are probably "Series EE", or maybe a combination of the two. Not a huge difference, but if I were asking the question myself I would take care to get the terms correct.

The "big tax hit" isn't the primary issue here. The main question is, how could this money best be put to work to provide retirement funds? If these bonds were issued in the early 1980's they are probably earning between 4% and 6% currently. Evidently your partner does not have assets in a 401(k) or IRA or even after-tax, equity-based vehicles. In my opinion, you and he need to develop a plan. I know that's why you came here.

The main intent of The Motley Fool is not to provide specific advice to investors/savers, but rather to make information available, and to provide tools to help in planning your moves.

According to your profile, you are a newly-registered Fool. I would recommend that you -- actually, your partner -- should go back to the home page -- www.fool.com -- take the tour, complete the Fool School, and decide what sorts of investments are appropriate.

BTW, you say your partner may retire in about 2010. If any of the bonds were purchased prior to 1980, he will have to do something with them prior to 2010, because they will cease to earn interest and, as I read the info at www.savingsbonds.gov/sav/savintax.htm , he will have to report the accumulated interest at that time. (I am assuming he has elected to defer reporting the interest on all these bonds.)

Good luck helping your partner with this decision!

Phooley
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