Figuring Out What to Do With Series EE Savings Bonds Fairly Complicated : Investing: The complications of varying tax breaks and interest payments are made worse by the fact that the products are thought to be simple.

The EE in Series EE Savings Bonds does not stand for extra easy.

It’s true that these small denomination bonds are marketed to “little guy” investors and that they are very simple to buy.

But once you own one, figuring out what to do with them can get fairly complicated. There are variable interest payments, tax breaks that only kick in under certain circumstances, and maturities and rate guarantees that shift from one bond issue date to another.

These complications play out worse than they really are, because of the mythology that these bonds are supposed to be simple.

Savers don’t always ask the obvious questions because they are sometimes embarrassed to admit they don’t understand these “simple” products. Bank employees and financial advisers who really can’t admit they don’t understand the finer points sometimes gloss over those details.

As a result, mistakes are made. People buy bonds at the wrong time for the wrong reasons and sell them just as badly. They pay taxes when they don’t have to, put them under the wrong names and forfeit interest for no good reason.

A new book, “U.S. Savings Bonds: A Comprehensive Guide for Bond Owners and Financial Professionals,” by Daniel Pederson ((800) 927-1901. $24.95, including shipping) should put an end to a lot of those mistakes and anxieties.

Pederson, who runs a Detroit-based service that provides bond owners with written analyses of their holdings, has explained all in this book. Now, savings bond holders can read Pederson’s book in the privacy of their own homes and tell everyone they know it all.

In the meantime, avoid the following common savings bond blunders, outlined by Pederson:

* Buying EE bonds for education breaks when you don’t qualify.

Parents who sell EE bonds to pay for their children’s college tuition don’t have to pay federal income taxes on the interest earned. That is, if their 1995 income is under $63,450 for couples or $42,300 for single parents and if the bonds are in the parents’ names.

At higher incomes, those tax breaks phase out, until there are none left for couples earning more than $93,450 or singles earning more than $57,300.

If you’re a real high earner, consider putting the bond in your child’s name and declaring the interest annually: The first $600 or so of interest will be tax free every year. Or put it in the child’s name and don’t declare the interest until you sell it after he turns 14.

Taxes will occur at his presumably lower rate. If you’re a lower earner, make sure you put the bonds in your name, not his.

* Forfeiting interest when you redeem bonds. Almost all EE savings bonds get their interest credited every six months, and every bond has its own six-month schedule. If you’re getting ready to cash them in, make sure you do so right after the half-yearly interest credit, and not just before.

* Paying too much (or double) taxes on the interest. Most taxpayers can declare the interest accrued annually and pay federal income taxes on it, even if they don’t collect the interest until they cash in the bond.

That sometimes makes sense: If you hold a lot of bonds and cash them in all at once the years of accrued interest can bump you to a higher tax bracket. But if you do declare the interest yearly, make sure you don’t pay taxes on all of it again when you sell the bonds.

If you plan to give the bonds away, warn the recipient that taxes have already been paid on part of the interest.

* Exchanging high rate bonds for lower rate bonds. Seniors who need to live off the interest often roll over existing EE bonds, which accrue interest over the life of the bond, into HH bonds, which pay interest twice a year.

But HH bonds currently pay 4%, and some older EE bonds pay far higher--as much as 7.5%, guaranteed, points out Pederson.

Instead of exchanging all the bonds, just sell the EE bonds paying the lowest rates, put the proceeds in a bank account or money market fund and live off that money. Hold onto the higher-yielding bonds longer. Pederson calls this “selective redemption.”