Savings Bonds

For taxpayers who are procrastinators, this is your year. Not only is the Internal Revenue Service asking those with more complex returns to hold off filing until mid-February, but the usual tax deadline has been extended three days, to April 18, because of a holiday in Washington. The IRS needs extra time to gear up for returns with itemized deductions because the law to extend the Bush-era tax cuts was passed so late last year. The agency must update its systems to account for certain revived tax breaks.

Gas and food prices are rising. Wallets are hurting. But it's not all bad news. Higher prices mean the interest rate on U.S. savings bonds tied to inflation will be going up, too. The interest rate on government I bonds adjusts every six months. The next adjustment will occur Thursday, and any I bonds purchased after that will probably carry an annualized rate above 5 percent, up from 4.28 percent now. But don't wait until Thursday to buy I bonds. Buy now, and six months from now you'll be earning more than 6 percent.

Love 'em and leave 'em. That's the attitude of American investors holding $14.5 billion in U.S. savings bonds that have stopped accruing interest because the bonds are more than 30 years old. Those who purchased Series EE bonds now wouldn't touch them with a 10-foot pole. Stagnant savings bonds symbolize one of several mistakes that experts say investors commonly make with this instrument. Mistake No. 1: Owners allow expired savings bonds to collect dust because they don't want to incur the tax liability involved in cashing them in. "I call these `stinker' savings bonds because if they're not earning interest, they are a terrible investment," said Tom Adams, who runs Savings-bond-advisor.

TIME IS RUNNING out for HH savings bonds and investors who may want them. At the end of this month, the federal government will stop issuing new HH bonds, which were introduced 24 years ago. The HH bond was never as popular as its siblings - Series EE and I bonds - which was part of the problem. Investors have more than $205 billion tied up in all types of savings bonds, but only $14.2 billion of that, or about 7 percent, is held in HH bonds. With low demand for HH bonds, the Treasury Department concluded they weren't worth the administrative expense.

How important is a net worth statement? How do I calculate my net worth? What are some commonly overlooked items in the calculation? And how do I value retirement assets: by the income they generate or by the principal that is generating that income? - C.B.W., Allentown, Pa. A net worth statement, your assets minus your debts, should be a starting point for any financial plan. The statement reveals what you own and what you owe. The statement catalogs the means you have to reach your short- and long-term goals.

FOR MORE than 20 years, people have invested in HH savings bonds as a way to delay paying income taxes and get an income stream to boot. Now, in the name of progress, the quirky bond's days are numbered. The Treasury Department said it plans to stop issuing new HH bonds by midyear, although no date has been set. "We're basically going all electronic," explained Stephen Meyerhardt, a spokesman with the Treasury's Bureau of the Public Debt. The HH bond doesn't easily fit that goal, and the small volume of the bonds didn't justify the expense of including them in the electronic system, Meyerhardt said.

There's good news and bad news for people who like to buy U.S. savings bonds. The good news is that the government increased the interest rate for the Series I bond, a type intended to offer bondholders some protection from inflation. As a result, if you buy a Series I bond now through April, it'll earn interest at an annualized rate of 4.08 percent. That's up from 2.57 percent for I bonds purchased from May through October. "In a tight, conservative, low-interest-rate environment, that's a pretty big jump," said Daniel J. Pederson, president of BondHelp.

DO YOU WISH you had a long-term investment strategy? Black Enterprise, July, lists these suggestions from legendary stock picker Peter Lynch: "Find publicly traded companies that provide goods and services we use regularly. ... Know everything about a company before buying its stock. ... After buying the stock, follow its `story' so you will know if the company's earnings are growing, slowing or stagnant. ... Don't sell the stock if the fundamentals are still good, no matter whether the market is up or down."

With the Nasdaq composite index posting its worst annual performance last year since its inception in 1971, investors might be looking for less risky places to put their money. They could even fall for U.S. Savings Bonds all over again. "I think people will reassess their feelings about risk and their own time frames for their investment," said Michael Dougherty, an associate vice president of investment for A. G. Edwards & Sons Inc. in Baltimore. "Depending on what their goals are, I think there are very valid reasons for some persons to be owners of U.S. Savings Bonds."

Americans keep more than $1 trillion in low-interest rate savings accounts, often for convenience and a desire for easy access to their cash, according to a recent study. But by shifting that money into safe, higher-yielding accounts, consumers could reap $30 billion to $50 billion in additional interest yearly, says the Consumer Federation of America and Providian Financial Corp. that commissioned the study. Low-yielding savings accounts that are earning on average 2.1 percent are widely held by consumers, no matter the age, income or education, the groups said.