When Does a Savings Bond Mature and When Should I Cash In?

Learn the differences between savings bonds—and what to do when you're ready to cash in

When Does a Savings Bond Mature and When Should I Cash In?

Learn the differences between savings bonds—and what to do when you're ready to cash in

Amid soaring inflation and an unstable market, savers may be looking for a low-risk way to grow their money. High-yield savings products are one way for you to get a reasonable and safe return for your liquid and shorter term cash needs with insured financial institutions. However, for those with a longer time horizon, savings bonds are widely considered to be one of the safest investments, since they’re backed by the U.S. government. 

There are two savings bonds sold today: Series EE and Series I. (Older bonds that are no longer sold may still be earning interest, depending on when they mature.) Though both bonds share some similarities, there are a few key differences that may impact the type you buy and when you’ll want to cash it in. Let’s take a closer look.

What are series EE bonds?

Series EE bonds are an attractive option for savers, especially those with long-term financial goals like saving for retirement.

With series EE bonds, the interest rate is fixed. Bonds sold between November 1, 2022 and April 30, 2023, earn an interest rate of 2.10%. The Treasury Department announces rates for new bonds in May and November.

Interest is paid monthly and compounded twice a year until the bond matures or until you cash in. Compounding is when interest is added to your principal, which earns you even more interest. Interest income is paid out when you redeem the bond.

One unique feature of series EE bonds: The government guarantees their value will double in 20 years, and if needed, will make a one-time adjustment.

How do I buy series EE bonds?

These bonds are only available electronically, so in order to buy one you’ll need to set up a TreasuryDirect account through treasurydirect.gov. The minimum purchase is $25, and the maximum is $10,000 per calendar year. You can specify the amount you want to purchase right down to the penny. All series EE bonds are sold at face value. This means you pay $50 for a $50 bond. Once you buy a bond, you won’t be able to sell or trade it.

What are series I bonds?

Series I bonds have caught investors’ attention lately, primarily because they help prevent money from losing value to inflation. 

Unlike series EE bonds, which have a fixed interest rate, series I bonds’ interest rate is a combination of a fixed rate and an inflation rate. The fixed rate stays the same for the life of the bond, while the inflation rate can change every 6 months to reflect changes in the Consumer Price Index. So when inflation is high, as it is now, your return increases. Currently, the interest rate is 6.89% for series I bonds issued between November 1, 2022 and April 30, 2023. During periods of deflation, the government guarantees the rate won’t fall below 0.00%.

Like series EE bonds, interest on series I bonds is earned monthly and compounded every six months, until the bond reaches maturity or you redeem it. You receive whatever interest income the bond earned whenever you cash in.

How do I buy series I bonds?

Series I bonds are available electronically and on paper, and both are sold at face value through the Treasury Department. The process of buying an electronic series I bond is the same as purchasing a series EE bond: Create a TreasuryDirect account on treasurydirect.gov, then specify the amount you want to buy, down to the penny, starting at $25 and going up to $10,000. (You can’t purchase more than $10,000 in a calendar year.) 

The process of purchasing a paper series I bond is a little different. You are only allowed to buy a paper bond with your income tax refund—up to $5,000 per calendar year. To purchase paper bonds, you must complete IRS form 8888; your bonds will be mailed to you after you file your taxes. 

Once you buy a series I bond, whether electronic or paper, you can’t sell or trade it.

Are savings bonds taxable?

Savings bonds are often a popular choice among investors who live in high-income tax areas—and for good reason. Whether you have a series EE bond or a series I bond, you only pay federal income taxes on the interest you earn. You can defer payment for up to 30 years and may even be able to avoid it altogether if you use the bonds for qualified higher education expenses.

When do savings bonds mature?

Both types of bonds mature after 30 years, meaning the principal has been paid off and no more interest is earned.

How long should I wait to cash in a savings bond?

It's a good idea to hang on to your bond for as long as possible, ideally until it matures, so you can take full advantage of compound and accrued interest.

Here's how that decision might pay off with EE bonds. Let's say you purchased the maximum of $10,000 in EE bonds today, with the current interest rate of 2.10%. In 10 years, the value of the bond increases to $12,323. At 20 years, it is guaranteed to double in value, so it will then be worth $20,000. By year 30, when it matures, the bond is worth $24,646.56, earning you an extra $14,646.56.

Depending your financial goals, you may decide to cash in before the bond matures. There are a couple of caveats to consider before you do:

  • You cannot redeem either type of bond during the first year of ownership.

  • If you decide to cash in between years 1 and 5, you forfeit three months of interest.

  • If you cash in a series EE bond before 20 years, you miss out on the guarantee for your investment to double.

How do I cash in a savings bond?

Redeeming a savings bond is a relatively simple process that may change slightly depending on whether yours is electronic or paper.

How to redeem an electronic savings bond

You can cash in your electronic series EE and series I bonds online; just log on to your TreasuryDirect account. The money will be deposited into your checking or savings account within a few business days, and an 1099-INT form will be sent to your account the following January. You’ll need this form when you file your income taxes.

How to redeem a paper savings bond

You can cash in paper bonds at a bank or mail them to the Treasury Department along with a completed and signed FS Form 1522. All paper bonds must be cashed out in full. (You can use the Treasury Department’s Paper Savings Bond Calculator to determine your bond’s value.) 

After you redeem the bonds, you’ll receive the 1099-INT form. If you cash in at a bank, the financial institution may give you the form at that point or send it to you the following January. If you cash in with the government, you’ll be mailed a form the following January.

How savings bonds differ from high-yield savings accounts and certificates of deposit

High-yield savings accounts, money market deposit accounts, certificates of deposit (CDs), and bonds are all valuable tools in a diverse portfolio of cash savings. Some differences between them include liquidity, interest rates, terms, and insurance.

High-yield savings accounts and money market deposit accounts offer the most liquidity of these options, however are subject to variable rates that could cause you to lose out on potential interest-earning potential. When the deposits are held in a federally insured financial institution, you are also able to be insured up to $250,000 per depositor, per institution, per account ownership category.

CDs also offer the same insurance limitations as high-yield savings accounts and money market deposit accounts when held at federally insured institutions. In contrast, however, most CDs impose a penalty when they are cashed in before the length of the term, making them less liquid than HYSAs and MMDAs. Terms and interest rates are set, however, making them a potentially great option when interest rates are high.

Finally, savings bonds like series EE bonds and series I bonds typically have a longer maturity window. You cannot cash them in during their first year and there is a penalty for cashing in before five years. In the case of series EE bonds, your principal is guaranteed to double at 20 years, regardless of their set interest rate. In the case of series I bonds, the interest rate is a combination of a set rate and a variable rate that is tied to inflation.

Raisin can help you find the savings option that fits your needs

Finding a savings product that matches your financial goals isn’t always so easy. Raisin offers a wide selection of market-leading products from FDIC-insured banks and NCUA insured credit unions for you to compare and—the best part—there are no fees to enroll. To start exploring your options, simply click here.

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