Granddaughter can cash those bonds and use the proceeds for college days


I had a question about the column that you did on savings bonds. I have quite a few for my granddaughter, in her name, and she'll be graduating from school, and I was going to give her the bonds after she graduates from high school to go on to college. Where can I cash these bonds in with her? We tried my bank but they couldn't help.

Your granddaughter can cash the bonds at any bank or credit union that deals in U.S. Savings Bonds, said John J. Foley, spokesman for the Bureau of the Public Debt, which runs the savings bond program. If you had no luck with your bank, try another, because most banks and credit unions sell bonds and accept them for redemption, he said.

When a minor is listed as the registered owner of a bond, whether she can cash the bond depends on her age, Foley said. A toddler couldn't do it; only the parent or legal guardian with whom she resides could, he said. But your granddaughter is almost college age and should be able to cash the bonds as long as she shows proper identification, Foley said.

The way I read it, one can roll over a traditional IRA to a Roth as long as (one's) modified AGI does not exceed $100,000. There is no differentiation between a single person and a married couple in regards to this threshold. Do you interpret this the same way? Doesn't this seem like it penalizes the married couple?

You're right on target. It's one of the many ways in which federal tax law discriminates against married couples.

If you have a traditional individual retirement account (IRA), you may "convert" some or all of the money to a Roth IRA. You must pay federal income tax on some or all of the amount you convert. But there are many potential benefits to having the money in a Roth.

With a traditional IRA, you must begin withdrawing money once you turn 70 1/2. The withdrawals are taxable. And you cannot contribute after you turn 70 1/2.

With a Roth IRA, you generally can withdraw money free of tax as long as you've had the account for a certain number of years. You need never withdraw money if you don't want to; you can leave it for your beneficiaries, who can make tax-free withdrawals after you die. And, you can continue to contribute to a Roth no matter how old you are (as long as you have earned income).

You can convert only if your income is $100,000 or less for the year in which you convert. This rule applies whether you're single or married and filing a joint federal income tax return. So if you're single and your income is $52,000, for instance, you can convert. If a man and woman are both single and each earns $52,000, each can convert. However, if a man and woman are married and each earns $52,000, neither can convert. Why? The $100,000 rule applies to their combined income (which would be $104,000 in this example).

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