I was sick and tired of being stuck in a time warp from 1993. My kitchen was golden oak everything – cabinets, molding, flooring – right down to the golden oak trim on my forest green formica countertops. I’d had enough; it was time to join the 21st century.
But here was the problem: my husband and I were a little short on cash. Yes, we had our emergency fund, but granite countertops don’t exactly fall under a critical need. So we decided to search out some creative ways to pay for our cabinets. Ultimately, we chose to cash in savings bonds that my grandmother had bought for me as a young child.
Cashing In Our Savings Bonds
It wasn’t a decision we made lightly. Here are the key factors we considered:
1) The majority of my bonds had reached their maturity date. In other words, they weren’t earning me a dime – heck, even the cash in our savings account (with its infinitesimal interest rate) was making more money for us! Since these mature savings bonds weren’t doing any work for me, I figured it was time to cash them in.
2) One option we’d considered was temporarily reducing our 401(k) contributions. Then we received our year-end investment summaries, and saw that my account had earned 7% over the previous 12 months, while my husband’s had fared even better – earning 7.4%. Of the bonds that were still earning interest, most were bringing in a meager 1.3% (little more than you’d get with a CD account), while a select few were earning a strong 4%. Even so, it didn’t make sense to stop investing in our retirement accounts when they were significantly outearning the bonds.
3) President Obama made middle class tax breaks one of the keys of his 2015 State of the Union address. I know it’s risky to bank on anything in Washington these days, but I’m hoping that by cashing in my savings bonds now, I’ll be able to take advantage of those tax cuts and pay a lower rate on the interest accrued (yes, you do pay interest on savings bonds) than I would down the road, when my husband and I are in a higher-earning tax bracket.
Do you have any savings bonds? If so, are you saving them for a rainy day, or something else?