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Savings Bonds - In The News
The following information is a log of recent news
articles concerning Savings Bonds.
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SOURCE |
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| Feb 2005 |
Asbury Park Press, NJ |
Featured Article [web link]
States defend bid for Saving Bonds
By Kathy Matheson, Staff Writer
Asbury Park Press • Tinton Falls, N.J.
State Treasurer John E. McCormac really can't understand what all the fuss is about. He just wants to reunite New Jersey residents with their long-lost savings bonds. Is that so wrong?
Well, yes. According to critics, McCormac's motives are not so altruistic. In fact, they say, he's being downright nefarious: making a money-hungry power-grab to confiscate the earnings of hard-working, unsuspecting citizens.
It's a misconception that is absolutely not true, said treasury spokesman Tom Vincz. "There's always that myth out there that the state is seizing assets," Vincz said. "(It's) not an issue of seizing property. This is a pro-consumer issue."
Here's the situation: McCormac and the state treasurer of North Carolina, Richard Moore, are suing the federal government for custody of all matured, unredeemed savings bonds belonging to residents of each state.
McCormac estimates that New Jersey residents have about $350 million in such securities sitting in the Bureau of Public Debt, a branch of the U.S. Treasury Department. Moore's office says the bureau is holding onto more than $300 million that belongs to North Carolinians.
States fault feds
The states claim, in an amended lawsuit filed last September in U.S. District Court in Trenton, that the federal government makes little effort to track down the owners - or their heirs - of these matured bonds.
New Jersey and North Carolina argue that their unclaimed property programs are extremely successful in finding the owners of abandoned bank accounts, safe deposit boxes and the like. So why not savings bonds, too?
In fiscal year 2004, the New Jersey Department of the Treasury returned about $56 million to 24,000 people, Vincz said. North Carolina returned more than $20 million to its residents in fiscal year 2003, according to the lawsuit.
Steve Meyerhardt, spokesman for the Bureau of Public Debt, remains unpersuaded. "They are obligations of the United States," Meyerhardt said of the bonds. "As the issuer, the Treasury Department has the obligation forever, essentially, of maintaining the bond records and responding to debt holders."
Meyerhardt wouldn't comment specifically on the states' lawsuit, but noted that the argument has been made before without success. He also disputed the contention that the government makes no effort to find owners of matured bonds, explaining that the bureau has a staff of about a dozen people that does just that.
The task is mammoth, as he acknowledged the agency is responsible for about $12.5 billion in unredeemed bonds. Yet the government does not notify bond holders when the securities have matured. That indicates to McCormac, the New Jersey treasurer, that "the feds don't have an aggressive effort" to find the bonds' rightful owners.
"If they did, they wouldn't have $12.5 billion in their vault," McCormac said. Meyerhardt said not all unclaimed bonds are lost or abandoned; in some cases, owners are fully aware that their securities have matured but choose not to cash them in because of the tax implications.
Interest reportable
Bond holders, though, are required to report interest income on the bond in the year it matures, regardless of whether it's redeemed, according to Jackie Brahney, marketing director of Savingsbonds.com, a bond tracking firm based in Spring Lake Heights.
The bonds New Jersey and North Carolina are seeking - known as Series E - were purchased between 30 and 40 years ago for three-quarters of face value, according to Meyerhardt. After accruing interest over the decades, he said, the bonds have reached their final redemption amount, which in some cases is up to seven times their face value.
However, noted Meyerhardt, "that value stays static for as long as the bond remains unredeemed. (Bond holders) are essentially losing value due to inflation for as long as they're holding the bond past maturity."
Bonds listed as debt
The total amount of matured, unredeemed bonds nationwide - $12.5 billion - shows up as part of the country's public debt. "It's of no real benefit to us," Meyerhardt said, noting he'd much rather have people cash in the bonds and get them off the bureau's books.
If New Jersey and North Carolina were to get control of the unclaimed bonds, officials would put them in interest-bearing trust funds. Garden State residents would be paid that interest when they claimed their bonds, according to New Jersey treasury spokesman Vincz.
North Carolina - per its constitution - would use the interest to fund scholarships for needy students to attend community colleges and state universities, said Kirsten Weeks, communications manager for the treasurer's office. Estimates show that North Carolina would earn between $6 million and $9 million per year for scholarships, benefiting 7,000 students annually.
In any case, the states would not touch the principal, which belongs to the bond owners - or their estates - until it is claimed, Vincz said. But even though owners would not be in danger of losing their securities to the state, they would have to go through the unclaimed property process before redeeming them.
That could take six to eight weeks, which concerns Assemblyman Christopher "Kip" Bateman, R-Somerset. "Right now, bond owners can go to any bank and receive cash on the spot for their bonds," Bateman said in a statement last week. "There is no valid reason to make them jump through a hoop to get their money."
On the other hand, she said, the possibility of the state stepping in "might get some of these seniors moving to cash in these bonds." Vincz conceded there would be a waiting period if the state won custody, but he suggested that bond holders probably wouldn't mind because they have already been waiting years - and in some cases decades - to cash them in.
He reiterated that bond holders would get additional interest upon redemption through the unclaimed property program. Still, that's not enough to convince Gerry Banmiller, president and CEO of 1st Colonial National Bank in Collingswood, Camden County, that the state should get involved.
When people buy savings bonds, Banmiller explained, they are buying them with the faith that the securities are backed by the federal government - not the state government. And obviously New Jersey is banking on the idea that not all of the bond holders will come forward, he said. "There is a presumption that some people won't file that claim, otherwise why do it?" Banmiller said.
SBPlanner.com offers a seminar strategy helping advisors reach senior owners of U.S. Savings Bonds. For more information, please visit our website at www.SBPlanner.com, call us at 800-717-2663, or email us at info@savingsbonds.com.
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| Jan 2005 |
Life Insurance Selling Magazine |
Featured Article [web link]
| Savings
Bond Owners: An Untapped Senior Market
by Jack Quinn
SBPlanner.com • Spring Lake Heights, N.J.
Many people own savings bonds
but few understand their rules. These bonds may be assets for
you to re-invest.
"They are the plainest of
investments, and Americans just love them — U.S. Savings
Bonds. Of all the subjects I cover, none draws as much mail from
readers,” says Philadelphia Inquirer columnist, Jeff
Brown.
The mere mention of savings
bonds, however, makes any financial services professional
cringe. But the savings bonds owner market should not be
overlooked. More than 60 million persons own over $200 billion
worth of savings bonds. And about 50% of all savings bonds are
purchased through payroll deductions set up through employers.
According to a Bankrate.com news article, $6.28 billion in
savings bonds were purchased in the year 2000 alone. More than
$9 billion worth of savings bonds have matured and no longer are
earning interest. To the financial adviser or planner, this is a
new source of untapped money that needs to be redeemed and
re-invested.
Who is a typical bond owner?
“If you could profile the type of person who buys savings
bonds, financial planners say it’s someone who is leery of
investments such as stocks and mutual funds but is aiming for a
long-term goal such as retirement or paying for a child’s
college education,” says Dino DeConcini, former executive
director of the U.S. Treasury Department’s now-defunct savings
bond marketing office in Parkersburg, W.Va.
With the elimination of the
U.S. Treasury Department’s marketing offices last year,
investors are seeking a trustworthy source for reliable
information. While U.S. Savings Bonds may be easy to purchase,
most investors do not know how to manage their investment
properly, and the government basically has abandoned this
market. Bond owners must go online and do their own research,
trying to interpret and understand all of the rules and
regulations regarding bond rates and values. It’s not that
easy.
Can’t the banks assist the
public with their savings bonds? Not really. With all the
banking consolidations and mergers going on, bond owners are
hard-pressed to find a bank employee who knows anything about
savings bonds, other than possibly how to sell them one. As
savings bonds are not a bank product, they do not carry a high
enough priority for financial institutions to encourage their
workers to become knowledgeable.
Here’s another piece of bad
news for the bond owner: As of August 31, 2004, the Bureau of
Public Debt will stop issuing the attractive HH savings bond,
which offers tax-deferred benefits. This is yet another black
eye the government has given to savings bond owners. It used to
be that savvy bond owners would roll over or exchange their E,
EE or matured H bonds into an HH bond as part of their financial
plan. This is no longer so.
This bond’s elimination has
left many seniors in a difficult predicament. Older bond owners
expected the HH bond would be available when their other bonds
matured; now they must face potentially serious tax consequences
if they cannot defer the accumulated interest. This could put
them into a higher tax bracket, increasing their tax rate from
5% to 15%. Also, their Social Security benefits could be
affected, as well as medical benefits and other tax breaks that
are based on adjusted gross income.
HH bonds come in denominations
of $500, $1,000, $5,000 and $10,000. For long-term investors in
savings bonds, this could mean tens, if not hundreds, of
thousands of dollars available for re-investment.
The recent changes initiated by
the government have left savings bond owners feeling orphaned
and confused. The closing of the savings bonds marketing offices
and the elimination of the HH bonds have left a large pool of
people with matured or nearly matured bonds struggling for solid
information on what to do with their money.
For the knowledgeable financial
planner or adviser, this provides a tremendous opportunity to
tap into a brand new audience actively seeking financial
guidance. Promoting the right asset management program ensures
that there is a natural transition from matured savings bonds
into variable annuities, mutual funds, and life products. The
forward-thinking financial services professional will recognize
the advantages to be gained by servicing this emerging niche of
long-term investors who are ripe for client acquisition.
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| Dec 2004 |
Investment Advisor Magazine - pg. 23 |
The Savings Bond Swell By Jack Quinn
The time is now to help older citizens with their savings bonds. You may help yourself as well
Client prospecting is a constant challenge. Uncovering a new market niche is no easy task. Due to recent government-instituted changes, however, there is a “perfect storm” brewing within the savings bonds industry that is creating a swell of potential investors, and savvy planners are beginning to ride the wave.
There are more than 20 million senior citizens who own about $100 billion worth of savings bonds. According to the Treasury Department, there are over $9 billion worth of savings bonds that have reached final maturity and stopped earning interest. Three key actions have occurred during the last couple of years that could put this money at risk of taxation or complete confiscation, if senior savings bond owners are not properly informed:
First, all savings bond marketing offices were shut down in 2003, eliminating a source for information about savings bonds. Although banks used to be a source of information about savings bonds, many no longer handle them.
Second, effective August 31, 2004, the Treasury Department stopped issuing the HH bond, which offered tax-deferring benefits to those who did not want to report the interest from matured bonds as part of their income. Lately, the IRS has been more aggressive on cracking down on those who do not claim this interest.
Third, the state treasurers of New Jersey and North Carolina recently announced they will take part in a lawsuit to legally claim all matured savings bonds that have not been cashed in by their residents. To put it bluntly, these states are seeking federal permission to confiscate people’s hard- earned money. If they are successful, it is very likely other states will follow.
All of this is especially critical to older citizens whose Social Security benefits, medical benefits, and other tax breaks could be affected, as they are calculated based on adjusted gross income.
Did you know that the interest earned by a matured bond must be reported on that year’s tax return, even if the bond was not redeemed? Unsuspecting bond owners can be hit with taxes and penalties by the IRS, and could be forced to file amended tax returns for those years in which their savings bonds matured. Valuable information such as this is very difficult to find for consumers themselves, making the need for sound financial advice regarding what to do with savings bond investments even more imperative.
Wise planners are beginning to recognize the importance of addressing the needs of senior savings bond owners. Frank Backe, a financial planner based in Colorado, uses savings bond seminars as his sole form of marketing for new clients. “A savings bond seminar attendee told me he was planning on selling his entire portfolio of savings bonds until an analysis report made him change his mind,” Mr. Backe explains. “He was not aware that half of the bonds were still earning 4% interest. Following the presentation, he asked for advice on some other investments. Last week, he invested over $300,000 with me. I am planning on doing two savings bond seminars a month in the next year.”
As negative forces have aligned themselves within the savings bond industry, the “perfect storm” for bond owners has certainly arrived. But this gale provides a golden opportunity for the proactive financial or insurance planner to alert and advise these seniors before their matured bonds are confiscated, and before they get into taxation issues with the IRS. Senior bond owners can be receptive to transitioning from savings bonds into annuities, other life insurance products, mutual funds, and other appropriate vehicles.
Jack Quinn is CEO of SBPlanner.com, a division of Union Information Services in Spring Lake Heights, New Jersey, which offers a seminar strategy helping advisors reach senior owners of U.S. Savings Bonds. He can be reached at 800-717-2663, or at jquinn@savingsbonds.com.
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| Nov 16, 2004 |
PRNewswire |
Seniors Beware of Tidal Wave Looming Over Savings Bond Investments, Says Expert
SPRING LAKE HEIGHTS, N.J., SBPlanner.com -- A tidal wave is looming
over the savings bonds world, and is creating a swell of confused Senior bond
owners, according to Jack Quinn, CEO of SBPlanner.com, whose expertise in
savings bonds has been widely recognized by the financial community and the
Treasury Department.
In light of government actions eliminating HH bonds that offered tax
deferment, closing savings bond marketing offices, and the likelihood of
states confiscating matured savings bonds, Quinn suggests Seniors seek
professional advice regarding their savings bond investments.
"These actions could affect Seniors' Social Security benefits, medical
benefits and other tax breaks, as they are calculated based on adjusted gross
income," says Quinn, whose company offers a marketing strategy for financial
professionals who work with Seniors.
The problems Quinn cites are:
-- Effective August 31, 2004, the Treasury Department has stopped
issuing HH bonds, which offered tax deferment to those who did not
want to report the interest from matured bonds. And lately, the IRS
has been aggressively pursuing those who do not report this interest
income on their tax return.
-- All savings bond marketing offices were shut down in 2003,
eliminating a source of information. And where banks used to be a
source of information about savings bonds, many no longer handle
them.
-- According to a press release by the Associated Press, the treasurers
of New Jersey and North Carolina announced they will take part in a
lawsuit to claim matured savings bonds that have not been cashed in.
"But there is help to weather this squall," says Quinn. "To assist Senior
bond owners, many financial professionals are providing free seminars that
explain recent changes in savings bonds." These professionals present other conservative investment options that
offer additional income or defer taxes. They also offer free Savings Bond
Performance Reports, which can be very helpful.
"It is estimated that over 20 million Seniors own approximately
$100 billion worth of savings bonds. According to the Treasury Department,
there are over $9 billion worth that have reached final maturity and stopped
earning interest," says Quinn.
Quinn says to contact your financial advisor or insurance planner to find
out when the next seminar will be held. Contact Quinn at jquinn@savingsbonds.com.
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| Oct 2004 |
Life Insurance Selling Magazine |
Resource Directory - CLIENT ACQUISITION
SBPlanner.com www.sbplanner.com A Fresh, Proven Client Acquisition Seminar Strategy! Reach
an Untapped Audience of 55+ Million Investors! Our Complete Turn-Key Marketing & Reporting
System will have High-Quality Prospects Calling You!
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| Oct 3, 2004 |
Palladium-Item |
Decades-old Postal Savings Stamps, Bonds can be redeemed
A Centerville-area reader says: "While going through my deceased father's papers we found two
"Postal Savings Plans for the Purchase of United States Defense Savings Bonds." One is full of
stamps and one is partially filled. They have a date of 1941 on them and appear to be a method
of saving to purchase savings bonds. "We also found one "United States of America War-Savings
Certificate" with one of 20 stamps in it. It states that it is of the "Series of 1918." "These
have sentimental value simply because they were his, but if they have any current value, they
could be a help for my mother who is now on a smaller income. Do you know whom we can ask about
these?"
According to the U.S. Treasury Department's Bureau of the Public Debt, the stamps can be
redeemed at their face value, which probably was $1 each. You can get cash or have their value
applied to a new savings bond.
However, as you mentioned, their sentimental value likely is
more than the actual cash value. You might contact a stamp collector to see if there is any
interest in them. It's likely that there are so many of them around that collectors pay little
more than face value. A quick look on e-Bay, the Internet auction site, showed a few stamps
available at only slightly above face value and a book for $3.99. It's always possible that
for some reason what you have is of more value than most.
If you want to redeem Postal Savings
Stamps with the government, send an inquiry to: Bureau of Public Debt, Special Investments Branch,
P.O. Box 396, Parkersburg, WV 26106-0396. The phone number is (304) 480-5299. Include as much
information as possible, including the owner's name, address, Social Security number and, if
possible, the issue date and/or serial numbers. The stamps were sold in small denominations
and then could be exchanged for Postal Savings Bonds -- after 1935 for U.S. Savings Bonds --
when enough money was accumulated. People who have Postal Savings Bonds, which paid 2.5 percent
interest, can redeem them by completing the back of the certificate and submitting it to: Definitives
Section, Bureau of the Public Debt, P.O. Box 426, Parkersburg, WV, 26106-0426.
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| Sep 21, 2004 |
Winston-Salem Journal, NC |
N.C. Treasurer Enters Lawsuit For Savings Bonds
RALEIGH, N.C. - The State Treasurer's Office wants the federal government to give it matured
U.S. savings bonds that haven't been cashed in by state residents. State Treasurer Richard
Moore has agreed to participate in the litigation initiated by New Jersey earlier this month.
Moore wrote the U.S. Treasury earlier this year asking that the bonds - potentially valued at
$300 million - be given to the state so it could try to contact the bond holders. Moore received
no response, prompting him to enter the legal action.
State unclaimed property laws and procedures
make "clear that the state is the appropriate repository for the unclaimed property at issue,"
Moore said in a news release this week. The state treasurer already holds $600 million in cash
from insurance policies, checking accounts and utility deposits long forgotten by state residents.
Moore, who is being challenged by Republican Ed Meyer of Greensboro in the Nov. 2 election, has
appeared in public service announcements and handed out checks to unsuspecting citizens to highlight
efforts to return money to its rightful owners. Interest on the unclaimed property pays for
university scholarships.
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| Sep 21, 2004 |
BankRate.com |
Your savings bonds are still good
Dear Dr. Don, I have some savings bonds from 1983. My bank has informed me that it is no longer
cashing bonds in. I have two questions. The first is: Would bonds issued in 1983 still earn interest
today? The second question is: How should I go about cashing in my savings bonds? -- Amy Accrue
Dear Amy, I'll assume that you own Series EE savings bonds issued in 1983. Such savings bonds will continue
earning interest through 2013, or 30 years from the date of issue. The Bureau of Public Debt has
a savings bond calculator on its Web site that will allow you to input the issue date and denomination.
The calculator will return the bond's current value and tell you when the bond stops earning interest.
Older Series EE savings bonds, like yours, have interest earnings credited every six months. If you
cash in the bond just before it increases in value, you'll lose the last six months' worth of
interest. It's best to redeem your Series EE savings bond just after it has increased in value.
The Bureau of Public Debt has a page on its Web site that discusses "When Savings Bonds Increase
in Value." Your bank should have been able to point you to a bank in your area that redeems savings
bonds. Ask again the next time you're at the bank. The Bureau of Public Debt doesn't maintain a list
of banks that will redeem savings bonds. You can write or call the branch of the Federal Reserve Bank
that handles savings bond transactions in your area. The Bureau of Public Debt has a Web page that
allows you to input your zip code to locate contact information for the Federal Reserve Bank branch
that can help you.
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| Sep 19, 2004 |
Detroit News, MI |
Rate on some bonds easily beat
Q. I currently own several Series EE savings bonds that were purchased in 1992 at 6 percent interest.
I also have several that I purchased in 1994 at 2.71 percent interest. Since I have a few years until
they reach their value, would it make sense to cash in the 2.71 percent bonds and open a five-year
certificate of deposit making 5 percent? I am in my mid-20s and retirement is a distant goal. I am
in the 25 percent tax bracket. The only thing keeping me in savings bonds is that they are state
tax exempt. At what rate would the CD have to be at to "make sense" to drop the bonds?
A. The applicable interest rate on a Series E/EE savings bond issued on or before April 1995 is more
complex than for saving bonds bought after that date. The rate at which these bonds earn interest
depends on their issue date. Some bonds are earning rates on a fixed scale established when they
were bought. Other bonds are earning guaranteed minimum rates. Still others are earning market-based
rates. Once your bonds are held for five years, they'll earn interest at either guaranteed minimum
rates or market-based rates, whichever produces the higher redemption value. Bonds with issue
dates of November 1986 through February 1993 have a guaranteed minimum rate of 6 percent per
year, compounded semiannually, for their 12-year original maturity period. Bonds with issue
dates of March 1993 through April 1995 have a guaranteed minimum rate of 4 percent per year,
compounded semiannually.
These bonds have an original maturity period of 18 years. Once they’ve
been held for five years, they become eligible for market-based rates. It looks like your 1992
bonds are at or nearly at the end of their original 12-year maturity period and will stop
earning 6 percent interest soon if they haven’t already. The 1994 bonds earning 2.71 percent
are good candidates for redemption and reinvestment.
Choosing between a 2.71 percent yield on
a savings bond and 5 percent on a CD isn't hard — choose the CD. Determining the after-tax
difference between the two yields would depend on your marginal state and local income tax rates.
A tax-equivalent yield calculator will help you decide if you’re getting enough of a pickup in
yield to justify the switch to a new investment.
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| Sep 19, 2004 |
Seattle Times / USA TODAY |
Cash in U.S. Savings Bonds for college and get a tax break
If you're shaking the sofa cushions to raise money for college-tuition bills, help may be as close as
your safe deposit box. Parents who cash in U.S. Savings Bonds to pay for a child's college tuition may
be eligible for a generous tax break. Ordinarily, owners are required to pay federal taxes on accumulated
interest when they redeem their bonds. But if you qualify, some or all of the interest on savings bonds
used to pay for college is tax-free.
For example, if you cash in bonds with $3,000 in interest, and you're in the 15 percent tax bracket,
you could save $450 in taxes. Yet not many families take advantage of this program. In part, that's
because it comes with a lot of restrictions. Among them:
Income. In 2004, married couples must have
modified adjusted gross income of less than $89,750 on their joint tax return to qualify for the
full tax break. If they earn $89,750 to $119,750, they are eligible for a partial exclusion. Couples
with incomes of $119,750 or more can't claim the tax break and couples who file separately can't
claim the exclusion.
For single taxpayers, the exclusion phases out between $59,850 and $74,850. The income limits are
adjusted annually for inflation. The income limits kick in when you redeem the bonds, not when you
purchase them. That's important to remember if you're considering investing in savings bonds while
your children are young. By the time your children are college age, you may earn too much to
qualify for the tax break, says Bob Scharin, editor of RIA's Practical Tax Strategies.
Ownership. Many children own savings bonds they've received over the years as gifts. And
many parents buy the bonds for their kids and register them in their children's names. Unfortunately,
those bonds don't qualify for the tax break. The savings bond must be registered in the name of one
or both parents, says Stephen Meyerhardt, a Treasury spokesman. Your child may be listed as a
beneficiary but not as co-owner. In addition, the proceeds must be used to pay education expenses for
you, your spouse or your dependents, says David Braverman, author of "The Standard & Poor's Guide to
Saving and Investing for College." That restriction makes most grandparents ineligible for the tax break.
Age of bonds and bond owner. The tax exclusion is limited to Series EE Bonds issued after 1989
and all inflation-adjusted I Bonds. The owner must have been at least 24 years old when the bonds were
issued.
Qualified expenses. To get the tax break, you must use proceeds from your savings bonds for
tuition and fees. You can't use the money to pay for other costs, such as books or room and board. If
your child receives a nontaxable scholarship or grant, you must reduce your qualified expenses by
the amount of those payments. The rules also bar you from using tax-free savings bonds to pay for
expenses used to claim the Hope tax credit, Braverman says. The Hope tax credit, available for the
first two years of college, is worth up to $1,500 per student in 2004. It's also limited to tuition
and fees. Because the credit offers a dollar-for-dollar reduction in your taxes, it's usually more
valuable than the savings-bond exclusion, Braverman says.
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