As we move into a new year, our thoughts turn to diets, ditching bad habits and seeking inner calm.
But add one more thing to the financial list of things that require our attention in 2016: U.S. Savings Bonds.
Thanks to higher interest rates in 1986, savings bonds were a huge deal at the time and maybe almost as hot in some minds as Wall Street. Thirty years later, the new year will mark a milestone when millions of Series EE savings bonds bought in 1986 will stop earning any more interest at various months in 2016, depending on when the bond was issued. And those bonds need to be cashed.
But here's the trick: No one is going to send you any notice on this deal or automatically redeem these bonds for you. It's totally up to you.
Unfortunately, savings bonds are one of those things that many of us have learned to ignore. But big money could be hiding in shoe boxes, safe deposit boxes and elsewhere among the savings bonds that you once found tucked in birthday cards, bonds bought through payroll deduction or inherited from your parents.
Nearly $12 billion in savings bonds were bought in 1986. Many of those bonds have yet to be cashed. As of the end of October, more than 12.5 million Series EE savings bonds bearing 1986 issue dates were outstanding, according to the federal Bureau of the Fiscal Service.
Only a few years had more sales for savings bonds, according to Daniel Pederson, author of "Savings Bonds: When to Hold, When to Fold" and president of the Savings Bond Informer. Other big years: 1992 with $17.6 billion in bonds sold; 1993 with $13.3 billion and 2005 with $13.1 billion.
Buying savings bonds was trendy in 1986 because bonds bought from January through October 1986 had an initial rate of 7.5 percent for the first 10 years. But the rate was set to fall to 6 percent on newly purchased savings bonds beginning in November 1986.
So people really loaded up on 7.5 percent bonds in October 1986.
Here are five things to know about savings bonds:
What's the bond really worth?
The $50 face value on the bond doesn't mean it's worth $50. Back in 1986, for example, you paid $25 for a $50 Series EE bond. So you've been building up interest toward the $50 value and beyond.
How much money you get when you cash your bond would vary considerably on the bond and what interest rates were paid during the lifetime of the bond.
How much money could we be talking about?
Plenty -- especially if you have a stack of bonds.
What's important to realize is that some people still haven't cashed other savings bonds from early in the 1980s, either. More than 7.2 million Series EE savings bonds issued in 1985, for example, remained outstanding and not cashed yet, as of Oct. 30, 2015. After 30 years, these bonds stop earning more interest.
A $50 Series EE savings bond with a picture of President George Washington that was issued in January 1986 was worth $113.06 as of December. The bond will earn a few more dollars in interest at the next payment in January 2016.
A $500 savings bond with a picture of Alexander Hamilton that was issued in April 1986 was worth $1,130.60 as of December. The next interest payment is in April 2016.
All bonds bought in 1986 are currently earning 4 percent until their final maturity date. So you do want to pay attention to when the next interest payment is made onto the bonds.
Savings bonds bought earlier in the year in 1986 paid the 7.5 percent for first 10 years. The bonds bought in November and December 1986 paid 6 percent for the first 12 years. After that, they both earned 4 percent.
Where can I cash the bond?
Often, it's easier to cash U.S. Savings Bonds, especially large amounts at once, if you're a customer at a given bank.
Remember, banks will have different policies on how much they will redeem in one visit. Some banks and credit unions also will not redeem savings bonds at all.
What kind of taxes will I owe?
First, you need to figure out how much of the money you receive can be attributed to interest.
Believe it or not, many people don't realize that they don't pay taxes on the entire amount of money they receive when they cash a U.S. savings bond, said George W. Smith IV, a certified public accountant and partner at George W. Smith in Southfield.
What you originally paid for the savings bond -- or the principal portion -- is not taxable. The interest earned is taxed at regular income tax rates, not as a capital gains income tax rate.
What's the interest rate you'd get if you bought savings bonds online today?
Nothing close to 4 percent anymore.
Now a Series EE savings bond issued from November 2015 through April 2016 will earn a fixed rate of 0.10 percent -- so they're not all that exciting.
SUSAN TOMPOR is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.
