Figuring Interest Rate on Savings Bonds
QUESTION: I have Series E and EE savings bonds that I purchased from 1973 to 1985. Can you please tell me what is the minimum interest these bonds have paid during this time?
ANSWER: We first have to divide your bonds into two categories. The Series E bonds you hold were purchased between 1973 and June, 1980. The lowest possible interest these bonds earned is 6%. However, according to a spokesman for the U.S. Savings Bond Division of the Treasury Department, the actual bonds you hold may have paid you more in the past. Currently, all of them are accumulating interest at the rate of 8.5%.
Series EE bonds became available in January, 1980, and their minimum guaranteed rate is 6%. However, beginning in November, 1982, the interest rate on all bonds held for five or more years is allowed to fluctuate above that 6% floor according to the general interest rate market. For example, bonds bought between January, 1980, and November, 1982, are paying between 8.77% and 9%. Bonds purchased from November, 1982, and October, 1986, are paying 7.5%
For more information, send a postcard to the U.S. Savings Bond Division, Public Affairs Office, asking for its “guaranteed minimum rate chart.” This list is published monthly and includes the minimum interest rates paid on all outstanding savings bonds. The address is 1111 20 St. N.W., Dept. C.L., Washington, D.C. 20226.
Q: I am concerned about what would happen to my wife and her ability to handle my individual retirement account if I should suffer a stroke that leaves me completely paralyzed and totally unable to communicate. How would my wife get my IRA funds? I’ve heard there is no power of attorney available for an IRA.--T. J. K.
A: Perhaps you misunderstood what you heard about the power of attorney and IRA accounts. According to our experts, there is no reason why an individual cannot assign administrative responsibility for his IRA account--or any other belonging--to another individual.
However, a traditional power of attorney can remain in full force only with the continuing consent of the giver. So, if the giver becomes so incapacitated that he cannot give this consent, a regular power of attorney transfer can be nullified, according to Ellen Marshall, a lawyer with the Costa Mesa office of Morrison & Foerster. To avoid problems of this kind for all types of assets, Marshall recommends that the giver sign what is known as a “durable power of attorney.” This document continues to remain in effect even after the giver becomes incompetent.
Q: Can you possibly stand one more question on buying Treasury bills? I’m wondering if the Federal Reserve Bank offers any simple system for rolling over investments into another bill when the first reaches maturity?--S. L.
A: Yes, the Federal Reserve Bank offers two very simple ways to roll over your investment.
First, when you complete the paper work for your initial purchase, you may indicate that you want the funds automatically reinvested in a similar security. If you’re not sure at the outset whether you want to reinvest, the bank offers you a second chance. About a month before your security reaches maturity, you will receive a notice that includes information on rolling over the account into another security.
As long as we’re on the subject of Treasury bills, let’s expand a little on the information included in last week’s column on how the discount rate is reimbursed to buyers. The amount of the discount is reimbursed when the purchase is completed, and checks for the amount of the discount typically are sent within a week of the auction. In the case of first-time buyers, the check is sent directly to them. For all subsequent purchases, the checks are deposited directly into a bank account specified by the buyer.
Again, Treasury bills are sold in three-month, six-month and 12-month maturities and are available in $5,000 increments from a minimum of $10,000 up to a maximum of $1 million. They are available directly from the Federal Reserve Branch on South Grand Avenue in downtown Los Angeles every Monday, or by mail. To order T-bills by mail, send a cashier’s check made out to the Federal Reserve Bank to your closest Federal Reserve Bank branch for the face amount of the bill you want to purchase.
For Southern California residents, the best address to use is P.O. Box 2077, Terminal Annex, Los Angeles 90051. Certified mail is recommended.
Q: We used to own two homes, one in Los Angeles, the other a cabin in a rural part of the state. We used each of them about six months per year. We sold them both last year and are wondering if we can apply the $125,000 profit exclusion to the combined total of the two profits. We will make a profit of about $45,000 on the Los Angeles house and about $40,000 on the cabin. We are both over 55 and have owned the houses for three out of the last five years. Can we exclude the combined $85,000 profit from the two houses?--G. K. H.
A: No, the bad news is that you may not combine the profits. According to Steven Franklin of Duitch & Franklin, a Brentwood certified public accounting firm, you may apply the exclusion to the profits from the sale of only one residence.
The intent of your question is obvious. You want to take the greatest possible advantage of the $125,000 exclusion because you know that once it’s used, it’s gone, regardless of whether it was fully exploited. Unfortunately, it appears that you are not in a position now to take full advantage of the $125,000 profit shelter. Your choices are to save the exclusion for a subsequent home sale, or if you aren’t going to be selling another home, applying it to the $45,000 you received on the sale of your Los Angeles property.
Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.