Author Topic: Cash out savings bonds?  (Read 1590 times)

~Ari~

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Cash out savings bonds?
« on: July 29, 2016, 11:07:04 AM »
Need some mustachian advice on this one...

My DH and I have some savings bonds that our parents and grandparents purchased for us when we were children. As of right now, 2/3rds of them are mature to cash out. But, they can still sit for another 15-17 years before they reach the "final maturity" date and acquire the average interest of 3%. As of today, the ones that are eligible to cash out total ~$2000.

Here is my question - we have $4900 @ 3.15% in student debt that we want to get rid of as soon as possible. We also have a line of credit of ~$11,000 @ 5% that we want to knock out as well. Would you cash out the $2000 to put towards it? Or would you let them still sit and wait for the rest to mature and for them to reach their "Final Maturity" date in 15 - 17 years to get max value? 

Timodeus

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Re: Cash out savings bonds?
« Reply #1 on: July 29, 2016, 11:28:52 AM »
If I was in your position currently I would look at what the interest rate those bonds that can currently be sold is. If the interest minus your marginal tax rate is higher than the 5% of your line of credit? I would keep them if they were.

That's a short simple answer, but there are tons of other variables. Will the money you're normally using to pay off the loans go to high return investments? If so, that might make you want to cash the bonds in.

I personally had a somewhat similar choice a few years ago while paying off debt. I had CDs and chose to cash them in to pay off the last of it, though mathematically it probably made sense to keep them. Psychologically it felt great though and helped me jump up my savings even more, more than enough to counteract the interest I lost paying off the debt.

PhysicianOnFIRE

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Re: Cash out savings bonds?
« Reply #2 on: July 29, 2016, 11:30:18 AM »
I would cash out to simplify. I did the same thing with a couple EE bonds we had been hanging onto for years. One had stopped accumulating interest, I believe.

Looks like it's more or less a wash money-wise, but life will be simpler without keeping track of those few savings bonds. I'd rather have a smaller debt than an OK asset and a larger debt.

Best,
-PoF

Choices

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Re: Cash out savings bonds?
« Reply #3 on: July 30, 2016, 04:19:01 PM »
I would cash out to simplify. I did the same thing with a couple EE bonds we had been hanging onto for years. One had stopped accumulating interest, I believe.

Looks like it's more or less a wash money-wise, but life will be simpler without keeping track of those few savings bonds. I'd rather have a smaller debt than an OK asset and a larger debt.

Best,
-PoF
+1

MDM

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Re: Cash out savings bonds?
« Reply #4 on: July 30, 2016, 05:26:03 PM »
See Individual - Savings Bond Wizard if you aren't already using it.  Appears you understand your situation pretty well but if you aren't sure what you are earning on the various bonds, the tool you can download from that site will help.