Does when you cash an I-bond matter?

[disneysteve]

I'm pretty sure I'm following things correctly on the Treasury website. Just want to be sure. We have some series I savings bonds that were bought years ago and we plan to cash them in for the funds to pay for our daughter's Bat Mitvah this fall. I seem to recall it used to be that if you cashed bonds in at the wrong time, you lost potential interest because of the way interest was credited, so cashing in a day too early could cost you months worth of interest. Obviously, I don't want to make that kind of error.

It appears that I-bond interest is credited monthly so that problem doesn't exist. I know you have to hold the bonds at least 5 years or else you pay an interest penalty of 3 months, but beyond that, it doesn't seem to matter when you redeem them. Am I correct?

[humandraydel]

From the TD website:

"I Bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I Bond's issue date."

So, I would cash them in on the first of the month. Similarly, I would buy them on the last day of the month.

[disneysteve]

Thanks. I didn't come across that segment. I knew there was something like that buried in the rules. Now that you mention it, I remember the part about buying at the end of the month. That's what I did when I got these bonds.

[aida2003]

From the TD website:

"I Bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I Bond's issue date."

So, I would cash them in on the first of the month. Similarly, I would buy them on the last day of the month.

This is good to know about buying at the end of the month.
So, if I buy on the 25th, will my I-bond be credited a full month's interest on the 1st of next month?
Also, interest is compounded semiannually, but it's credited each month, correct?

Do you know how to convert paper I-bonds to electronic? I couldn't find an explanation of such a process on the Treasury's website. We've got a few paper I-bonds and we also bought some electronic ones last year. It would be good to combine them in one place.

I have one more question about the issue date. Our paper bonds display two different months and I cannot figure out which one stands as an issue month/date. Can anyone give me a hint about that?

In a nutshell, I bought I-bonds knowing NOTHING about them except that it's SAFE and tax is deferred until cashed (and had some spare $ after investing). Hence my questions

[disneysteve]

So, if I buy on the 25th, will my I-bond be credited a full month's interest on the 1st of next month?

Yes. You basically get a month free.

[Like2Plan]

Do you know how to convert paper I-bonds to electronic? I couldn't find an explanation of such a process on the Treasury's website. We've got a few paper I-bonds and we also bought some electronic ones last year. It would be good to combine them in one place.

aida2003,
Do you already have an account with treasury direct? If you don't, you need to establish an account. But, it you already have one, you have to ask for an invitation to convert:
"To receive the invitation you must submit an email from within your TreasuryDirect account by clicking on the blue link "Contact Us" located at the top right of the webpage above your account number.

The invite to convert comes through your investor inbox with instructions on how to proceed. (You have to make a manifest with the serial numbers of the bonds you are converting as well as the issue date)

You then mail the manifest and the bonds in and they convert them. It does not take very long.

I have one more question about the issue date. Our paper bonds display two different months and I cannot figure out which one stands as an issue month/date. Can anyone give me a hint about that?

Issue Date–The date your bond was issued. It’s the month and year printed on the right side of your bond, below the Series.
(It should be the top date).

[aida2003]

aida2003,
Do you already have an account with treasury direct? If you don't, you need to establish an account. But, it you already have one, you have to ask for an invitation to convert:
"To receive the invitation you must submit an email from within your TreasuryDirect account by clicking on the blue link "Contact Us" located at the top right of the webpage above your account number.

The invite to convert comes through your investor inbox with instructions on how to proceed. (You have to make a manifest with the serial numbers of the bonds you are converting as well as the issue date)

You then mail the manifest and the bonds in and they convert them. It does not take very long.



Issue Date–The date your bond was issued. It’s the month and year printed on the right side of your bond, below the Series.
(It should be the top date).

Thanks so much. Yes, we have an account already (I think it's in my DH's name, cannot recall), though I haven't used it for a year or so. Just receintly we received a special accesss card from the Treasury, so now I'll have to make some time and explore the conversion process.