Can you cash a bond that hasn't matured?
Most bonds can be cashed in after one year, but you will lose three months' worth of interest if you cash them in before five years.
You can get your cash for an EE or I savings bond any time after you have owned it for 1 year. However, the longer you hold the bond, the more it earns for you (for up to 30 years for an EE or I bond). Also, if you cash in the bond in less than 5 years, you lose the last 3 months of interest.
However, investors who sell their bonds prior to maturity will only receive the interest due on the bond until the date of the sale. They will lose all rights to the interest that would have accrued between the date of the sale and the bond's maturity date.
Typically, the longer you commit to leaving your savings untouched, the higher your interest rate will be. During this set period, you cannot access the cash in your bond, but you will earn a fixed amount of interest. If you do need to access it many providers will charge penalties for early withdrawals.
When a savings bond is redeemed after five years, the owner receives the original value plus all accrued interest. If a bond is redeemed before five years, the holder loses the last three months of interest. Occasionally, bond owners hold onto bonds after they have reached maturity and are no longer earning interest.
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|---|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
After 20 years, the Patriot Bond is guaranteed to be worth at least face value. So a $50 Patriot Bond, which was bought for $25, will be worth at least $50 after 20 years. It can continue to accrue interest for as many as 10 more years after that.
Investors of bonds, however, may decide it is more advantageous to sell a bond rather than hold it to maturity. Some of these reasons include anticipation of higher interest rates, that the issuer's credit will be lowered, or if the market price seems unreasonably high.
While the Treasury will not penalize you for holding a U.S. Savings Bond past its date of maturity, the Internal Revenue Service will. Interest accumulated over the life of a U.S. Savings Bond must be reported on your 1040 form for the tax year in which you redeem the bond or it reaches final maturity.
You can hold Treasury bills until they mature or sell them before they mature. To sell a bill you hold in TreasuryDirect or Legacy TreasuryDirect, first transfer the bill to a bank, broker, or dealer, then ask the bank, broker, or dealer to sell the bill for you.
Do you pay tax on bond withdrawal?
Full surrenders
When a bond (or individual segments) is fully surrendered, any profit the investment has made (known as the 'chargeable gain') will be assessed to income tax.
Interest from corporate bonds and U.S. Treasury bonds interest is typically taxable at the federal level. U.S. Treasuries are exempt from state and local income taxes. Most interest income earned on municipal bonds is exempt from federal income taxes.
Reporting the Interest for Taxes
Owners can wait to pay the taxes when they cash in the bond, when the bond matures, or when they relinquish the bond to another owner. Alternatively, they may pay the taxes yearly as interest accrues. 1 Most owners choose to defer the taxes until they redeem the bond.
Is there a penalty for cashing an EE or I Bond before it matures? There is a 3-month interest penalty if you cash an EE or I Bond within the first five years from its issue date.
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
A bond's term to maturity is the period during which its owner will receive interest payments on the investment. When the bond reaches maturity, the owner is repaid its par, or face, value.
Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.
U.S. Savings Bonds mature after 20 or 30 years, depending on the type of bond: Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity.
They're available to be cashed in after a single year, though there's a penalty for cashing them in within the first five years. Otherwise, you can keep savings bonds until they fully mature, which is generally 30 years. These days, you can only purchase electronic bonds, but you can still cash in paper bonds.
Considered one of the lowest-risk investments on the U.S. market, 10-year Treasurys are a “risk-free” benchmark against which other investments and debt are compared. (Three-month Treasury bills are another.) While no investment is ever completely risk-free, Treasury notes come close if held to maturity.
How long does it take for a $100 Patriot bond to mature?
Current Series EE bonds mature after 30 years, but they are guaranteed to double in value in the first 20 years during which time the interest rate is fixed. For example, if you invested $5,000 into Series EE bonds today, you are guaranteed to have at least $10,000 in 20 years.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it's a good idea to cash them in because you won't get any extra benefit.
In rare cases, we may hold corporate bonds to maturity, but, generally speaking, we recommend selling bonds before maturity to lock in capital appreciation and maximize investment returns.
- Historically, bonds have provided lower long-term returns than stocks.
- Bond prices fall when interest rates go up. Long-term bonds, especially, suffer from price fluctuations as interest rates rise and fall.
The only option for cashing electronic savings bonds is by logging in to your TreasuryDirect account online. If you have paper savings bonds, you can fill out the appropriate form and mail it and the bonds you want to cash to the Treasury Retail Securities Services — the address is listed on FS Form 1522.
