Sorting Out Savings Bonds

Savings bonds may be the most complex financial instruments known to man when you're trying to figure out which ones to redeem. Cashing in bonds at the wrong time costs owners more than $100 million a year in lost interest, estimates author Donald Pederson.

At this point try not to redeem series EE bonds until they are five years old. Thanks to a quirky rule, these bonds get a big bonus on their fifth birthday, jacking the real yield to more than 15% for the six month interest period that includes the fifth anniversary. After that the interest will average 4% to 5%. Of course that's better than the 0% being earned by almost $6 billion worth of bonds that have ceased paying interest altogether because they are too old. If you own any of these, cash them in now.

Source: Roha, R. R. (1999, July). Family finances - don't cash these savings bonds. Kiplingers, p. 52.