Why would anyone buy EE bonds?
Series EE
| 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 |
Guaranteed returns.
One of the most attractive benefits of EE bonds is the guaranteed return. The U.S. Treasury pledges that these bonds will double in value if held for 20 years, translating to an effective interest rate of about 3.5% per year over that period.
All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.
You can receive years of “extra” interest by holding the bond beyond the maturity date, but once 30 years have passed, you won't accrue any extra interest. 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.
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.
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.
Where do I cash in a savings bond? You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.
The bond isn't worth its face value until it matures. (The U.S. Treasury Department no longer issues EE bonds in paper form.) Electronic Series EE Bonds are sold at face value and are worth their full value when available for redemption.
The interest your EE bonds earn is generally subject to federal income taxes. But you can wait to pay the taxes until the bond matures or you cash it. Your EE bonds' interest is not subject to state or local income taxes. Using the money for higher education expenses may also help you avoid federal income taxes.
Do EE bonds really double in 20 years?
EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.
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.
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.
There are two primary reasons a bond might be worth less than its listed face value. A savings bond, for example, is sold at a discount to its face value and steadily appreciates in price as the bond approaches its maturity date. Upon maturity, the bond is redeemed for the full face value.
It will provide some inflation protection in case inflation gets high again. The fixed rate of 1.3% is good for an I bond. In my opinion, EE bonds are only good if you intend to hold them for 20 years so you get the doubling effect, which amounts to an annual interest rate of 3.54%.
Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity. Series I bonds are sold at face value and mature after 30 years. Interest is added monthly to the bond's value.
If you hold savings bonds and redeem them with interest earned, that interest is subject to federal income tax and possibly federal gift taxes (highly unlikely as the per-person cap is $10,000 and the gift tax exemption is $17,000).
I cashed some Series E, Series EE, and Series I savings bonds. How do I report the interest? In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.
Interest from EE U.S. savings bonds is taxed at the federal level but not at the state or local levels for income. The interest that savings bonds earn is the amount that a bond can be redeemed for above its face value or original purchase price.
To give a different example, say you purchased a $100 Patriot Bond on the later end of its availability, in November 2009. That bond would be worth only $56.40 in November 2019, because it wouldn't reach full maturity until November 2039.
Why would anyone buy a 10 year Treasury bond?
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.
| Total Price | Total Value | YTD Interest |
|---|---|---|
| $500.00 | $2,127.80 | $50.40 |
You can report the interest each year you earn it or when you cash the bond. You will report it on Schedule B of your 1040. You can avoid these taxes by using the money for qualified higher education expenses.
TO CASH BONDS FOR A DECEDENT'S ESTATE:
Series EE, Series E, and Series I bonds can be cashed at a local financial institution. Some of these transactions may have to be forwarded for further processing. Series HH and Series H bonds must be sent to one of the addresses shown at the bottom of the following page.
If you still have a paper EE bond, check the issue date. If that date is more than 30 years ago, it is no longer increasing in value and you may want to cash it. See Cashing EE and I savings bonds. To find out how much your paper EE savings bond is worth, use our Savings Bond Calculator.
