Friday, September 04, 2009

Finding your own buried treasure!

There was a time when U.S. savings bonds ruled. For members of the baby boom generation in particular, U.S. savings bonds were ubiquitous. Boomers received them as birthday or graduation gifts, and they bought them using Savings Stamps at school or through payroll savings plans at work. Indeed, millions of boomers are holding bonds.

These bonds were popular because they were the quintessential safe investment: a government-guaranteed return on investment.

The problem is that many bond holders were not careful with their bonds. As a result, many got stuck in a desk drawer or placed in a safe deposit box, never to see the light of day again. That's why the Department of the Treasury today has more than $16 billion worth of fully matured savings bonds on its books that are no longer earning interest for their owners.

These Series E bonds, which were bought in varying denominations between 1941 and 1979, are worth a minimum of four times their face value.

Sometimes they are worth even more. A $100 Series E bond bought for $75 in April 1960 would be worth more than $700 today. But since that bond--and any bond over 30 years old--has stopped earning interest, bond holders are losing money to inflation by not cashing in.

The Treasury has begun a campaign to raise awareness about this potential windfall. At a time when the government's own finances are stretched, why is the Treasury urging Americans to find their matured bonds? First and foremost, it is the right thing to do. After all, it is the consumer's money. Moreover, in these troubled times "found money" can significantly help bond owners who may be struggling financially.

The Treasury has created the website, to facilitate the search for unredeemed bonds.

If the bonds were bought in 1974 or later, holders don't even need to know the bonds' serial numbers. They can just enter the Social Security numbers of people in their family who may have purchased bonds, and the data base will match the numbers against matured, unredeemed savings bonds. The website includes a calculator to tell you how much unredeemed bonds are worth, and it provides instructions for finding bonds issued prior to 1974.

Here are low-tech tactics you can use:

-- First complete a financial inventory of all of your assets. Carefully
check the information provided. If you have unredeemed bonds, we
encourage you to redeem them now, when "found money" would be
especially welcome.
-- Here are some places you can look for bonds: a safe deposit box, home
safe, or a special "hiding place" such as an old chest of drawers in
the basement or attic. Baby boomers might find savings bonds tucked
away in a scrap book with their old report cards.
-- We encourage you to talk with relatives at family events about old

Once the bonds are found, cashing them in is relatively easy. For small amounts, it's more cost-effective for you to redeem the bonds yourself. You can cash your matured savings bonds at most local banks.

Treasury doesn't maintain a list of local banks that redeem bonds, so you should be sure to check with your local bank branch. When you present the bonds at the bank, you will be asked to establish your identity. If you have an account at the bank, you can redeem an unlimited dollar amount of bonds. If you do not have an account at the bank, you may be limited to $1,000 worth of bonds at a time.

If the savings bonds are held in the name of a deceased relative, the bonds can still be redeemed for their full value. The heir or legal representative merely has to fill out a form, provide the required documentation, and send the notarized materials to the Treasury Department. There are different forms for different situations, but all can be found at .

One of the biggest concerns some people have is the tax liability associated with matured bonds. Obviously, individual situations will vary, but for the vast majority of Americans, cashing the bonds will not affect tax rates and will provide extra after-tax money. Federal income taxes are due only on the interest earned by the bonds, and U.S. savings bonds are exempt from state and local income taxes. The Treasury Department provides an IRS Form 1099-INT either at the time of redemption or, in most cases, at the end of the tax year.


I want to thank you all for your courage and patience you have shown during one of the most difficult bear markets of our lifetime. We are honored by your decision to retain and keep us as your trusted financial counsel during this period of time.

Although there are no guarantees, it appears that the majority of you have been rewarded for your decision and it shows in your current Schwab statements. I am almost afraid to make this next statement, but it appears most of you are in position to make some of the best returns of your lifetime, if the stock markets continue to react as positively as they have so far. In my estimation, that includes a stock market pull back in September and possibly part of October, at which time we hope to invest the rest of your investable assets.

As always, when you are done with this newsletter, please pass it on to someone you think would benefit from it. If you know of someone who might benefit from our counsel, please give them a copy of this newsletter and have them contact us. We are still looking for four or five good new clients.

September is usually the worst month of the year!

No, I do not think September will be the worst month of 2009. The worst should be far behind us. However, the stock markets have gotten far ahead of themselves. Those of you that I have met with in the last six weeks know I have been standing on one foot and then the other, because the stock markets have been recovering and I felt I should be investing the second half of clients' investable money. Yet, historically, September is the worst month of the year for the stock market. So I have been waiting and biding my time until September got here.

Since the majority of you have been out of the markets for most of 2008 and early 2009, we are far ahead of the October 11, 2007 to August 20, 2009 stock market returns. As the markets recover, you stand to make some very nice returns that those who rode the stock markets all the way down can only dream of. That is, if I get the rest of your money back into the markets. Up until now for 2009, we have been beating DJIA and S&P 500 indexes and the Nasdaq index has been beating us. I am very competitive and would love to beat all of the indexes. However, this is not only impossible but, at this point, it may be taking your risk tolerance levels beyond what you want.

Most everyone I have visited with recently has agreed the prudent thing to do is wait for September. So we wait for a few more days to see what September will bring us.