How To Cash In Savings Bonds (2024)

U.S. savings bonds have been used by generations of everyday Americans to generate stable, low-risk returns on cash savings. Depending on the type of savings bond and the available interest rates when the bond is purchased, you may earn a yield that’s competitive with the best savings accounts—as long as you don’t cash out too soon.

When the time comes, you can redeem your savings bonds in a variety of ways. But first, you’ll want to be certain you have a good grasp of what savings bonds are and how they work.

What Is a Savings Bond?

Savings bonds are a form of federal government debt. When you buy a savings bond, you’re lending money to Uncle Sam with the understanding that the government will repay the money to you over a certain period of time at a certain interest rate.

The bonds are generally considered to be safe, reliable investments because they’re issued by the U.S. Treasury and backed by the full faith and credit of the U.S. government.

Savings bonds can be purchased for yourself or given as gifts. Some people may remember going to the bank as a child and receiving a $50 savings bond as a birthday present. You might discover some old savings bonds you’ve forgotten about, or you may inherit some savings bonds from a loved one.

Paper bonds are still around, though many newer savings bonds exist only in electronic form.

How Do Savings Bonds Work?

The savings bonds sold today can be purchased for as little as $25 and will earn interest for up to 30 years.

Interest on the current crop of savings bonds is earned monthly and compounded every six months. You may not cash in a savings bond for the first 12 months after purchase, and if you redeem before five years have passed, you’ll lose three months’ worth of interest as a penalty.

The government issued its very first savings bond in 1935, and several types have been offered over the years. Some older bonds mature—that is, stop paying interest—after 20 years.

Savings bonds that are so old they’re no longer gaining value should be redeemed for cash to be put into other investments. (Maybe new savings bonds.)

Types of US Savings Bonds

These days, two kinds of savings bonds are sold by the U.S. Treasury: Series EE and Series I savings bonds. Older varieties, including Series E and Series HH bonds, may still be held by savers in the U.S. but can no longer be purchased.

Series EE

Series EE savings bonds are sold electronically at TreasuryDirect.gov, and new ones earn a fixed rate of interest.

The annual interest rate for a bond bought from May 2022 through October 2022 is 0.10%. But regardless of the rate, the government guarantees that a Series EE bond will be worth twice what you paid for it once it’s 20 years old.

Series EE savings bonds sold before May of 2005 have variable rates that are updated every six months; the current rate paid on bonds issued from May 1997 through April 2005 is 1.60%.

Before 2012, Series EE bonds were issued on paper and were sold at half their face value. For example, you could buy a bond for $100, and it would be worth $200 when redeemed after a certain period. Today, an electronic Series EE bond with a face value of $100 is sold for $100.

You can buy an EE bond for as little as $25 and are allowed to purchase up to $10,000 worth during a calendar year.

Series I

Series I savings bonds are sold electronically on TreasuryDirect and also can be purchased in paper form with your federal tax refund.

The interest rate on Series I bonds is divided into two parts: a fixed interest rate that’s available when the bond is purchased and an inflation rate that’s calculated twice a year. With inflation now riding high, Series I bonds sold through October 2022 carry a lofty initial interest rate of 9.62%.

Electronic Series I savings bonds:

• Can be bought for a minimum of $25
• Are available in one-penny increments above $25, meaning you could make a one-time electronic bond purchase of $25.01
• Have a purchase limit of $10,000 per calendar year

Paper Series I savings bonds:

• Can be bought for a minimum of $50
• Are sold in $50, $100, $200, $500 and $1,000 denominations
• Have a purchase limit of $5,000 per calendar year

In addition to Series EE and Series I savings bonds, a few older types of savings bonds no longer are being sold but are still owned and may still be paying interest. If you hold these types of savings bonds, you might want to redeem them soon.

Series E

The Series E savings bond was introduced in 1941 as a “defense bond.” It became known as the World War II war bond, purchased by millions of Americans to help fund the war effort.

Series E bonds were sold as savings bonds until 1980 when they were replaced by Series EE; the last Series E bonds stopped paying interest in 2010. If you still own a Series E bond or have inherited a Series E bond, you can redeem it for cash.

Series HH

Series HH savings bonds were issued from 1980 to 2004 and had a maturity date of 20 years, so some of these bonds are still earning interest until 2024. If you want to redeem a Series HH bond, you need to send it to Treasury Retail Securities Services at a particular address with a specially signed form; your bank cannot cash these bonds for you but can help you with the process.

Several other older series of savings bonds, such as Gulf Coast Recovery Bonds (issued through 2007 to help fund relief efforts after the Gulf Coast hurricanes) and Patriot Bonds (issued through 2011 to help provide financing for antiterrorism activities after 9/11), are no longer sold by the U.S. Treasury but may still be earning interest and have cash value.

Before you attempt to cash in a savings bond, you’ll want to know whether it has matured and get an idea of its value.

How Much Is My Savings Bond Worth?

The value of a savings bond depends on a few factors:

• What type of savings bond it is.
• When it was issued.
• Whether it was sold at face value or as a percentage of face value.

If you own a savings bond that was purchased electronically at TreasuryDirect, you should be able to check the details about the value of your bond through your online account.

However, many people still own savings bonds that were issued on paper. If you have an older paper bond, you can use the free calculator on TreasuryDirect to figure out the value of your bond. Enter the bond’s series (such as EE or I), serial number, denomination and issue date, and you’ll be given a figure representing the bond’s current value.

How To Buy Savings Bonds

Follow the steps below when buying savings bonds.

• Decide which type of savings bond to purchase: Series EE or Series I.
• Determine the amount you want to invest: $25 to $10,000.
• Go to TreasuryDirect.gov and fill out the application for the bond purchase.
• Pay for the bond using a debit card, your tax refund or a transfer from your bank.
• Save the confirmation or receipt for your records.

You can view your newly purchased bonds by logging into your TreasuryDirect account.

Where To Buy Savings Bonds

There are two ways to buy savings bonds:

Online at TreasuryDirect.gov. You can buy electronic savings bonds directly from the U.S. Department of the Treasury’s website. You’ll first need to set up an account. Then, you can purchase Series EE and Series I bonds in amounts ranging from $25 to $10,000 per year.

Through your tax refund. When you file your federal income tax return, you can choose to use part of your refund to buy paper or electronic Series I savings bonds. If you buy them electronically, you’ll complete your purchase through TreasuryDirect.gov.

How To Redeem Savings Bonds

There are multiple ways to redeem savings bonds, depending on which type you have.

For electronic bonds (Series EE or Series I bonds):

• Redeem the bond online via your TreasuryDirect account.
• Wait a few days for the funds to be deposited into your checking or savings account.

For paper bonds:

• Check if your financial institution can redeem the bond.
• Ask about any limitations or requirements the institution may have.
• Fill out FS Form 1522 if the bond is an older series like HH bonds.
• Send the bond with a certified signature and direct deposit instructions to the government’s Treasury Retail Security Services team.

If your bank or credit union cannot cash an older bond or if you have special circ*mstances:

• Seek help from your bank or financial institution to figure out the redemption process.
• Have your signature on the Treasury form certified by the bank.
• When in doubt, head to your bank to get started.

Are Savings Bonds a Good Investment?

Savings bonds can be a good investment if you prioritize safety and security over high returns. Savings bonds are issued by the U.S. government and are backed by the full faith and credit of the government, which means they’re considered low-risk investments.

However, the returns on savings bonds are generally modest compared to other investments, and they may not keep up with inflation over the long term. So while savings bonds can be a good fit for certain investors, they shouldn’t make up 100% of your investment strategy.

When Should You Cash In a Savings Bond?

You have to wait at least one year before you can cash most bonds—although, you should wait at least five years to cash in a savings bond if you want to avoid losing some of the interest accrued.

Deciding when to cash in a savings bond can depend on several factors. Once you know how much your bond is worth, you can decide whether to redeem the bond for cash. Here are several questions to ponder before you attempt to cash in a savings bond:

• Has the bond fully matured? If your bond is no longer paying interest and has fully matured, then you may as well cash it in and put that money toward other purposes.
• Has the bond reached its full face value? Some bonds were sold at half of face value and can be redeemed only for full face value after a certain period of time has passed. Make sure you’re eligible to receive the full amount of cash you were expecting.
• Will you have to pay an interest penalty? If you have a bond that you’ve owned for only a few years, you might not be able to redeem it without paying a penalty in the form of forfeiting a few months’ interest on the bond. If you’re willing to give up that interest, then go ahead and redeem the bond. But make sure you’re aware of the implications.
• Why are you cashing out the bond? Savings bonds are meant to hold your savings and deliver a stable interest rate over several years. Why are you cashing out this bond now? Can you earn a higher yield on your savings by investing in the stock market or putting the cash into a high-yield savings account? Do you need short-term cash for an emergency or a major purchase?

In all cases, make sure your decision to cash out the savings bonds is part of a larger plan, is in line with your risk tolerance and your investment timeline, and is contributing to your overall financial goals.

Tax Implications for Redeeming US Savings Bonds

Interest income from U.S. savings bonds is subject to federal income tax but not state or local income taxes. Depending on your tax situation, your savings bond interest also can be subject to federal or state inheritance or estate taxes and federal gift tax and excise taxes.

The interest income from a U.S. savings bond can be reported to the IRS during each year when the interest was accrued, or you can report the interest income all at once after redeeming the bond. Talk with a professional tax advisor to decide which reporting method makes the most sense for you.

To learn more about how to redeem savings bonds, check out the Treasury Department’s guide. Before redeeming a savings bond, make sure you understand your bond and are ready to deal with possible interest penalties or tax implications.

And be prepared to talk with a professional financial advisor about how you might put your savings bond money to better use in support of your long-term financial goals.

Bottom Line

A savings bond can be a dependable way to generate a stable return on investment of your money. Remember, though, that it might take many years to recognize the full return on that investment.

Frequently Asked Questions (FAQs)