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Cashing Paper Bonds After Converting Them To Electronic: Can You Redeem Any Amount In $25 Increments

Sherlock
  |     |   48 posts since 2020

For paper bonds you must sell the whole bond. But once converted to electronic, can you redeem any amount in $25 increments like any electronic savings bond

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alan1
  |     |   876 posts since 2015
Sherlock -- Apologies for not responding sooner -- legitimate queries and comments on the Forum are being drowned out by posts setting forth opinions about Biden, Trump, etc., and by resident experts who _know_ what a god promised several thousand years ago in relation to Israel/Palestine (and feel a need to inflict such knowledge on this site's readership).

1. There is no requirement that electronic savings bonds be redeemed "in $25 increments".
2. The minimum redemption amount is $25.00.
3. If you make a partial redemption, you must leave at least $25.00 in the partially redeemed bond.

The above points apply to electronic savings bonds, whether they were originally purchased in electronic form or were converted from paper.
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Sherlock
  |     |   48 posts since 2020
Alan, Thanks so much your helpful explanation. I recently read about redeeming in $25 increments from a comment on the I Bond article on Tipswatch and just assumed it was fact. Thanks for clearing it up.
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Sherlock
  |     |   48 posts since 2020
So I post this question on the ask the community forum which is described as Take advantage of the knowledgeable community by asking your banking question here. But my question gets drowned out by irrelevant political nonsense, none of which relates to banking. That's called hijacking the forum with off topic posts. Ken Tumin, please do something. Are you moderating or not?
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Sherlock
  |     |   48 posts since 2020
Ken, are you moderating or not
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w00d00w
  |     |   360 posts since 2012
are there any remaining advantages for keeping paper bonds instead of converting to electronic?
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Sherlock
  |     |   48 posts since 2020
I just came across a Bogleheads discussion "Any reason NOT to convert paper savings bonds? Some of the people joining the discussion question the security of TreasuryDirect and feel safer having the paper bonds and a few people think for inheritance purposes it's easier to have the paper bonds.
this is the link to that discussion:
https://www.bogleheads.org/forum/viewtopic.php?t=410721

I'm relatively new to I Bonds and I have both electronic and paper. I'm not sure of my long term I Bond strategy yet, so indecision and procrastination play a major role in not converting the paper
bonds.
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milty
  |     |   1,672 posts since 2018
Seems like I recall if your bonds are electronic then they will automatically be sold upon maturity. Perhaps you may not want that due to tax purposes. But not sure my recollection is correct.
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alan1
  |     |   876 posts since 2015
milty -- Electronic savings bonds are automatically redeemed at maturity.

As to those paper savings bonds where the bondholder does not report the interest on an annual basis: The interest is taxable no later than the year of maturity, whether or not the bondholder redeems the bond in the year of maturity.

From IRS Publication 550 ("Investment Income and Expenses"):

Reporting options for cash method taxpayers. If you use the cash method of
reporting income, you can report the interest on Series EE, Series E, and Series I bonds in either of the following ways.
1. Method 1. Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature.

[Method 2 is annual reporting of bond interest.]
(bold in original; italics added)

p. 7 of PDF at https://www.irs.gov/pub/irs-pdf/p550.pdf
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milty
  |     |   1,672 posts since 2018
Thanks, Alan1. I think the person I spoke to about this must have assumed that the interest on those paper bonds didn't need to be reported till redeemed.
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w00d00w
  |     |   360 posts since 2012
Sherlock, thanks for the link. Regarding the TreasuryDirect site, it did get overwhelmed for awhile at the height of the IBond frenzy. So if a situation arises in the future that prompts a massive sudden outbound flow of money from TreasuryDirect, risk of the same problem reoccurring. Hopefully they've made some adjustments to better manage heavy traffic at the site.
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