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Published on 08/04/1997 All articles from this issue

Some savings bonds don't pay interest after they mature

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By Clyde Noel / Town Crier Staff Writer

Holding a savings bond past its final maturity date is like burying your money in the back yard. That's because the value of the bond remains fixed at the amount the bond was worth when it stopped earning interest.

On May 1 the first set of U. S. Savings Bonds issued between May 1967 and October 1970 will reach final maturity and become part of a larger group of bonds that have stopped interest.

Savings bonds, one of the most trusted investments in America, have a built-in hazard that is commonly overlooked. When a savings bond reaches final maturity and stops earning interest, Uncle Sam gets to keep the money and use it interest free until the bond is redeemed or exchanged.

According to the Savings Bond Informer Inc., four sets of bonds cease earning interest each month.

They include Series E bonds that are more than 40 years old, Series E bonds issued December 1965 and more than 30 years old, Series H bonds that are more than 30 years old, and Savings Notes that are more than 30 years old.

"The government saves over $200 million a year in interest expense by using the public's money free," said Dan Pederson, author of "U.S. Savings Bonds: A comprehensive Guide for Bond Owners and Financial Professionals."

Pederson, a consumer advocate for bond owners since he left the Federal Reserve Bank in 1990, predicts the amount of these fully mature savings bonds will grow to more than $7 billion by the year 2000.

According to Pederson, the government never issues statements detailing the performance of these investments, and bond owners, sometimes even bankers, mistakenly assume interest will continue to accrue as long as the bond is held.

In "U.S. Savings Bonds: A Comprehensive Guide," consumers are given the facts about savings bonds and the tools needed to make informed investment decisions. For information about the book, call 1-800-927-1901 or for a fuller explanation of contents, visit the author's web site at www.bondinformer.com The web site also provides savings bond tips.