Kevin Standlee (kevin_standlee) wrote,
Kevin Standlee
kevin_standlee

Maturity

Back when I started working for Blue Shield of California (which I did for 5 1/2 years), I signed up for the Payroll Savings Plan. They took $25 out of each of my every-two-weeks paychecks and bought a $50 bond. (At the time, Series EE Savings bonds cost half their face value.) The bonds had a variable rate but a guarantee that if they hadn't yet reached face value by a certain point, the government would make a one-time payment to bring them to that point. The rate I got on those early bonds meant that the "catch-up" payments were not needed. EE bonds stop accumulating interest (to keep the government from accidentally giving the store away to someone's great-great-great grandchild) after 30 years. Over the years, I bought more bonds at different values, and over time I ended up having to cash most of them, often forfeiting interest, but I tried to keep the oldest bonds around because they had the best interest rates. I also put all of the paper bonds (which are no longer issued anyway) into the Treasury department's online system, which makes management and cashing of bonds easier.

On October 1, the oldest of the bonds reached its final 30-year maturity. That bond, purchased for $25 in October 1988, had a final maturity value of about $103. Not a fortune, but it returned roughly twice the rate of inflation over its lifetime, which is not bad.

I considered what to do with these bonds, which will now start maturing roughly monthly for a while. I could buy new bonds, but I'd be tying my money up for another minimum term, and the current rates are abysmal. And even so, I still owe federal income tax on the interest earned. (Bond interest isn't taxable until you cash the bonds.) After thinking it over, I decided that I'm just going to take the money and make extra payments toward my consumer-grade debt. That amounts to a decent return on investment right there.

It's not a fortune in bonds (only a few thousands dollars), but I feel good about having managed to hold on to at least some of them all the way to maturity.
Tags: finance
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