Investing

How to cash in your U.S. savings bonds: Here's everything you need to know

Twenty/20

Savings bonds are considered a safe, reliable investment that can provide you money over time — and you may even have a few of them lying around. Perhaps you received a savings bond as a gift when you were a child and your grandparents or other relatives told you to hold onto them until they matured when you were older. 

That advice stands: In general, the longer you hold a savings bond, the more it's worth. But if you tucked away savings bonds years or even decades ago, and they have reached maturity (which is 30 years for most U.S. savings bonds) or are no longer earning interest, then it makes sense to cash them in. 

Here's how to redeem your savings bonds and a few suggestions for using the money wisely.  

What type of savings bond do you have?

Looking at the type of savings bond you're holding can help you determine the best time to redeem it and how much you stand to gain. There are three main kinds: 

  • Series E/EE savings bond: These electronic bonds have a face value of $25 to $10,000 and mature after 30 years. Depending on when the EE bond was purchased, it has either a fixed or variable interest rate. EE bonds are unique in that the government guarantees they'll double in value at some point before they reach maturity. (If the current interest rate doesn't get you there, the government makes a one-time adjustment at a set point to bump up the bond's value.) The bond will then continue to earn interest until maturity.
  • Series I savings bond: Like Series EE bonds, Series I bonds can be purchased at face value and mature after 30 years. But unlike Series EE bonds, they're adjusted for inflation, meaning they have both a fixed interest rate that does not change over the life of the bond, and a variable rate that changes based on inflation and the Consumer Price Index (CPI). You can buy electronic versions for anywhere from $25 to $10,000, or paper bonds for $50, $100, $200, $500, or $1,000.
  • H/HH savings bonds: HH bonds earn a fixed interest rate and mature after 20 years. The government stopped issuing HH bonds in 2004, but if you're holding on to one issued after 2000, then your bond is still earning interest. 
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Figure out how much your savings bonds are worth 

Before cashing in a savings bond, check the issue date. You must wait at least 12 months from the purchase date before redeeming it. If you cash in a bond before the bond is five years old, you'll typically face a penalty and lose the last three months of interest. (There may be some exceptions if you've been affected by a natural disaster.) 

If you received a savings bond as a kid, it's probably safe to assume it's more than five years old. But that doesn't tell you its current value. You can use the Savings Bond Calculator from TreasuryDirect to determine how much your old bonds are worth right now. You can also find details about their future value, helping you decide when to cash them in.

To look up your bond, you'll need to know the type of bond, its denomination, and the date it was issued. You can find all this information on the bond itself. 

How to decide if you should cash in a savings bond

Even if your bond hasn't matured, it might be worth cashing in now. Depending on when the savings bond was issued, it may pay a lower interest rate than a high-yield savings account or it may not be keeping pace with the rate of inflation. For perspective, some of the best high-yield savings accounts right now offer up to a 1.5% interest rate.  

And one measure of inflation has been in the range of 0.5% to 1.8% in the past year.

"Savings bonds are good to the extent that you want money you know will be there, but the downside is, they pay very little interest, so you end up losing money over time because it can't keep up with inflation," says Chad Hamilton, a certified financial planner and the director of practice management at Brown & Company in Denver, Colorado.  

Savings bonds are good to the extent that you want money you know will be there.
Chad Hamilton
Director of practice management at Brown & Company

Whether or not you opt to cash in is also "contingent upon your circumstances," adds Hamilton. He suggests thinking about the "opportunity cost" of leaving your money in a savings bond versus "investing it in something that has a lot more appreciation potential." 

Typically, you'll owe federal taxes on the interest your bond earns. Depending on the bond, you might choose to report that interest on your taxes each year or defer it until you redeem the bond or it reaches maturity. Your interest income from bonds is recorded on form 1099-INT

Where to cash in your bonds 

The easiest and quickest way to cash cash in your paper bonds is to do so at your bank or financial institution. Bring along a photo ID for verification purposes. You'll have the option of exchanging the bond for cash or depositing the proceeds into your savings or checking account. 

If you have an electronic bond, you can cash it in online at the Treasury Department's TreasuryDirect website and have the funds transferred to your checking or savings account. 

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Depending on the value of the bond, it might be tempting to spend cash that you didn't even know you had coming. But instead of splurging, consider using the cash value of your bonds to pay down high-interest debt or to pad or start an emergency fund.

You could use the money to build more wealth by investing the money in your retirement account.  

"If you have a long enough time horizon and they're not funds you're going to need right away, there are a lot of opportunities," says Hamilton. 

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