Given that we're in one of the worst economic downturns in generations, you'd think people would make the most of any extra cash they've got stashed. Not necessarily so. About $16.7 billion in matured, unredeemed U.S. savings bonds is sitting in savers' shoe boxes, desk drawers and safe-deposit boxes.
"Matured" means no longer earning interest. Bonds don't expire, but holding on to matured bonds is like keeping money under the mattress. You're earning nothing. (The good news is that, unlike money under your mattress, there are ways, through the U.S. Treasury, to recover savings bonds destroyed in a fire or other disaster.)
Yes, interest rates on savings accounts are abysmally low now, but earning 1% or so is better than nothing at all, right?
Among the savings bond types no longer earning interest are all Series H bonds, many Series E bonds, and some Series EE and Series HH bonds. After June, all Series E bonds will have stopped earning interest.
When bonds stop earning interest, people should redeem them, said Adams, who advocates purchasing savings bonds as an investment.
One common reason why people don't redeem matured bonds: Federal tax is owed on the interest income.
"A lot of people are concerned about the taxes they'll owe if they cash the bond," Adams said. "It is actually a financial mistake to think that way because you end up giving the government a free loan -- you're not earning any interest. People often let this go on for years and years. If they had reinvested, they would have made enough to pay the taxes and more."
The Treasury Department has a team of workers who attempt to contact people with unredeemed bonds, and they hear a variety of answers when people explain why they resist redeeming bonds, said Joyce Harris, a spokeswoman with the Treasury's Bureau of the Public Debt.
Harris said people say things like "Yes, I know I have the bond, but I just want to hold on to it for a rainy day," and "This was given to me by my grandmother, who passed on." In other words, savers form sentimental attachments to their bonds.
Others consider their bonds a patriotic duty -- purchased to help the United States fight a war -- and redeeming them doesn't play a part in that duty.
