How to Cash in Series EE Savings Bonds
Know the different interest rates of EE savings bonds., Know that you cannot redeem an EE savings bond for a year after it was purchased., If you choose to redeem an EE savings bond before it's five years old, know that certain penalties apply...
Step-by-Step Guide
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Step 1: Know the different interest rates of EE savings bonds.
Knowing the value of EE savings bonds will help you decide whether it's a good idea (i.e. it makes financial sense) to cash in your bonds.
Depending on the year issued, EE savings bonds have different interest rates.
Bonds bought before May 1997 earn different interest rates, depending on when they were bought.Bonds bought between May 1997 and April 2005 earn a variable interest rate, meaning their interest rate changes.
It changes every six months, and it's 90% of the average five-year Treasury yield for the previous six months.Bond bought between May 2005 and the end of 2006 earn between
3.2 percent and
3.7 percent, and will continue to do so for as long as you own them. -
Step 2: Know that you cannot redeem an EE savings bond for a year after it was purchased.
Whether you purchased the bond yourself or were given the bond as a gift, it cannot be redeemed until a year after its purchase., EE savings bonds were meant to be long-term investments.
Cashing in an EE bond before it's five years old comes with it forfeiture of the last three months of interest payments., EE savings bonds double in value at the 20 year mark, meaning that if you want to get the best bang for your buck, wait until the bond has reached its 20 year maturity.
Say you have a bond worth $100 and an interest rate of .20%.
After 20 years, the bond reaches a maturity value of $200, even though the nominal value of the loan, given the interest rate, would normally be $105.
After the adjustment, and until the loan hits 30 years old, it will earn a fixed interest rate.
Regardless of the interest rate on your current EE savings bond, waiting 20 years before cashing in the bond will guarantee you an effective yield of about
3.5 percent., EE savings bonds only earn interest for 30 years; if you happen to be sitting on a bond that is older than 30 years, it doesn't make much sense to keep it invested in an interest-less bond, so cash it in. , Electronic bonds can be redeemed online and credited directly to a checking account within 1 or 2 days.
Paper bonds can be redeemed at participating banks.
Check with your local bank to see if they redeem EE savings bonds.
Note that the policies about redeeming bonds less than and greater than $1,000 in person may differ.
Paper bonds greater than $1,000 may require a certifying officer to be with you when you cash in the bond. , You have the option of deferring taxes until you cash the bond in, or paying taxes when the bond matures — whichever comes first.
If you do not wish to defer taxes, you may pay them at the end of the year.
If you wish to factor in an education tax credit, it's best to defer taxes until you cash the bond in. -
Step 3: If you choose to redeem an EE savings bond before it's five years old
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Step 4: know that certain penalties apply.
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Step 5: Wait at least twenty years for the best investment.
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Step 6: Cash in any EE savings bond that is older than 30 years old.
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Step 7: Cash in your electronic bonds and paper bonds differently.
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Step 8: Be prepared to pay taxes on your EE savings bond.
Detailed Guide
Knowing the value of EE savings bonds will help you decide whether it's a good idea (i.e. it makes financial sense) to cash in your bonds.
Depending on the year issued, EE savings bonds have different interest rates.
Bonds bought before May 1997 earn different interest rates, depending on when they were bought.Bonds bought between May 1997 and April 2005 earn a variable interest rate, meaning their interest rate changes.
It changes every six months, and it's 90% of the average five-year Treasury yield for the previous six months.Bond bought between May 2005 and the end of 2006 earn between
3.2 percent and
3.7 percent, and will continue to do so for as long as you own them.
Whether you purchased the bond yourself or were given the bond as a gift, it cannot be redeemed until a year after its purchase., EE savings bonds were meant to be long-term investments.
Cashing in an EE bond before it's five years old comes with it forfeiture of the last three months of interest payments., EE savings bonds double in value at the 20 year mark, meaning that if you want to get the best bang for your buck, wait until the bond has reached its 20 year maturity.
Say you have a bond worth $100 and an interest rate of .20%.
After 20 years, the bond reaches a maturity value of $200, even though the nominal value of the loan, given the interest rate, would normally be $105.
After the adjustment, and until the loan hits 30 years old, it will earn a fixed interest rate.
Regardless of the interest rate on your current EE savings bond, waiting 20 years before cashing in the bond will guarantee you an effective yield of about
3.5 percent., EE savings bonds only earn interest for 30 years; if you happen to be sitting on a bond that is older than 30 years, it doesn't make much sense to keep it invested in an interest-less bond, so cash it in. , Electronic bonds can be redeemed online and credited directly to a checking account within 1 or 2 days.
Paper bonds can be redeemed at participating banks.
Check with your local bank to see if they redeem EE savings bonds.
Note that the policies about redeeming bonds less than and greater than $1,000 in person may differ.
Paper bonds greater than $1,000 may require a certifying officer to be with you when you cash in the bond. , You have the option of deferring taxes until you cash the bond in, or paying taxes when the bond matures — whichever comes first.
If you do not wish to defer taxes, you may pay them at the end of the year.
If you wish to factor in an education tax credit, it's best to defer taxes until you cash the bond in.
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Pamela Foster
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