Bonds. Savings bonds. The basics of nonmarketable U.S. securities M

By PORTSIA SMITH

OST AMERICANS have heard of bonds.

No, I'm not talking about James or Barry.

I'm talking about U.S. savings bonds, or nonmarketable securities issued by the U.S. Treasury Department that gain interest over time.

According to the Bureau of Public Debt, nearly 50 million people own savings bonds.

Any U.S. citizen can buy bonds. They come in eight denominations from $50 to $10,000.

People keep them as savings or for their children's college fund, or give them as a gift.

I recently inherited several old bonds, and despite the fact that I'm a business reporter, I realized I didn't know what to do with them or how to find out how much they are worth.

And I'm not the only one.

According to the Bureau of Public Debt, there are 34 million unredeemed bonds--worth $13.6 billion--that have matured and stopped earning interest.

"People should redeem them if they can and put that money back to work," said Kim Treat, acting executive director for investor education and communication for the Bureau of Public Debt.

Otherwise, it's like stashing cash underneath the mattress.

Those bondholders, like me, probably don't know how to go about cashing them or don't know they have them.

Loaning money to Uncle Sam

When a person buys a bond, they are "loaning the U.S. government an amount of money which they would pay back to you with interest," Treat said.

There are several types of bonds available, which earn varying rates of interest.

The two most popular bonds are the I and EE series, which both earn monthly interest at a variable rate.

The I bond is issued at face value, meaning $100 buys a $100 bond. The current interest rate for them is 4.8 percent, Treat said.

EE bonds are issued at half the face value, meaning $50 buys a $100 bond. Their current interest rate of 3.5 percent is based on the market.

Adjusted interest rates are announced every May and November, Treat said.

Bonds offer attractive interest rates; safety because they are backed by the U.S. government; and accessibility because the money placed into bonds can be retrieved as soon as 12 months from the issue date, he said.

A penalty of three months' interest is withdrawn if a bond is cashed earlier than five years from the issue date, Treat said.

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After savings bonds mature--30 years after the issue date for I and EE savings bonds--they stop earning interest and should be redeemed.

Bonds can be redeemed at any bank where the bondholder has at least a six-month-old account in good standing or is personally known by the bank's staff.

Banks can't redeem more than $1,000 in savings bonds for noncustomers. In that case, the bondholder can ask the bank to certify his/her signature and forward the bonds to a Federal Reserve Bank. The Federal Reserve Bank will mail a check for the redemption value of the bonds.

Bondholders can redeem savings bonds if they are the owner, executor of an estate, beneficiary, or the parent of a child who owns the bonds.

Calculating a bond's worth

Go online to publicdebt .treas.gov /BC/SBCPrice and enter the information on your bond. The site's calculator will give you the bond's current value.

Date published: 10/15/2005

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