Are Savings Bonds an Identity Theft Risk?

Dear Dr. Don, I have several savings bonds that have our Social Security numbers on the front. They're placed very prominently. I am really afraid to cash them because of the Social Security numbers and the risk of identity theft. What can I do about that?

Thanks, -- Lee Leery

Dear Lee, First, figure out whether the savings bonds have stopped earning interest. If they haven't, and they're earning a good yield, then it may be premature to redeem the bonds. I like using the Treasury's Savings Bond Wizard at TreasuryDirect.gov, which allows you to add bonds to a portfolio that can be saved for future reference.

The Treasury started masking the first five digits of the owner's Social Security number on savings bonds issued on or after Aug. 1, 2006, to reduce the chance, however remote, that savings bonds could lead to identity theft.

I asked a Treasury representative whether you could request that your older savings bonds be replaced. The representative replied, "We generally do not reissue paper savings bonds to change or mask the Social Security number. However, you may submit the bonds and a signed letter to our office for consideration to request that the bonds be reissued, to mask the Social Security number."

The representative also pointed out that when savings bonds are redeemed, the person's Social Security number is written in full on the back of the bond for tax purposes, so the interest income can be reported to the Internal Revenue Service. That means that even a savings bond with a partially masked Social Security number on the front will still have a Social Security number written on the back.

If the bonds haven't matured, or even if they have, you could consider opening a TreasuryDirect account and converting your paper bonds to electronic form. You would have to enter your Taxpayer Identification Number, or TIN, which for most of us is our Social Security number.

But you'd be doing it within the security precautions on the TreasuryDirect site. By converting the bonds to electronic form, you can redeem them online and have the proceeds deposited into your linked bank account. (There's a second step required for matured bonds.)

If the electronic conversion isn't your cup of tea, then I suggest you skip the reissue request and just go ahead and redeem the bonds at a local participating financial institution. If you're worried about identity theft, then take the precaution of freezing your credit reports. Bankrate can show you how.

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