Your Complete Guide to Redeeming U.S. Savings Bonds: What You Need to Know

Millions of Americans hold U.S. savings bonds as part of their long-term savings strategy. Whether you inherited bonds from a family member, received them as a gift years ago, or purchased them yourself, understanding when and how to cash savings bonds is essential to maximizing your returns. This guide walks you through everything you need to know before you decide to redeem your bonds.

Understanding What Savings Bonds Actually Are

Savings bonds represent a direct loan you make to the federal government. When you purchase one, you’re essentially purchasing a promise from the U.S. Treasury to return your money with interest over a specified period. Because they’re backed by the full faith and credit of the U.S. government, they’re widely considered among the safest investments available to everyday savers.

The U.S. Treasury first introduced savings bonds in 1935, and they’ve remained a cornerstone of conservative investing ever since. Some bonds exist only in digital form today, while paper versions still circulate—many dating back decades and still earning value.

The Two Modern Types of Savings Bonds Available Today

If you’re purchasing new bonds, you have two options through TreasuryDirect: Series EE and Series I bonds. Older varieties like Series E and Series HH may still be held by savers but are no longer sold.

Series EE: Fixed-Rate Bonds

Series EE bonds offer a straightforward proposition: they earn a fixed interest rate locked in at the time of purchase. Bonds issued between May and October 2022, for example, carry a 0.10% annual rate. However, the government guarantees that any Series EE bond will double in value within 20 years, regardless of the stated interest rate.

Before 2005, Series EE bonds carried variable rates updated every six months. If you own one of these older bonds from May 1997 through April 2005, it’s currently earning 1.60% annually.

Purchase details:

• Minimum investment: $25
• Maximum per calendar year: $10,000
• Format: Electronic only (as of today)
• Price: You pay face value ($25 for a $25 bond)

Series I: Inflation-Adjusted Bonds

Series I bonds take a different approach by combining a fixed base rate with a variable inflation component, updated twice yearly. This structure means your earnings adapt as inflation changes. Series I bonds sold through October 2022 feature an especially attractive composite rate of 9.62%—a significant boost compared to traditional savings vehicles.

Electronic Series I bonds:

• Minimum: $25
• Increments: Available in one-penny steps (buy $25.01 if you prefer)
• Annual cap: $10,000 per calendar year

Paper Series I bonds (purchased with tax refunds):

• Minimum: $50
• Denominations: $50, $100, $200, $500, $1,000
• Annual cap: $5,000 per calendar year

Historical Bond Series You May Still Own

Older bond types are no longer issued but may still hold value:

Series E bonds originated in 1941 as “defense bonds” to fund World War II. These stopped earning interest in 2010, but if you still hold one, redemption is possible.

Series HH bonds were issued from 1980 through 2004 with 20-year maturity periods. Some HH bonds continue earning interest through 2024. Redeeming HH bonds requires sending them to Treasury Retail Securities Services along with a specially signed form—your bank cannot handle this process directly, though they can assist.

Other discontinued series like Gulf Coast Recovery Bonds and Patriot Bonds may still have cash value despite no longer being sold.

Determining Your Bond’s Current Value

Before making any redemption decision, you need to know what your bonds are actually worth.

If you purchased through TreasuryDirect electronically, your online account provides complete details and current valuations. For paper bonds, the Treasury offers a free calculator at TreasuryDirect.gov. Simply enter the series type, serial number, denomination, and issue date to receive the current value.

The calculation depends on three factors: bond type, issue date, and whether it was sold at face value or a discount. A $50 paper Series EE bond purchased in April 1992 for $25, for instance, was valued at $103.68 in May 2022—more than double the original investment.

Deciding Whether Now Is the Right Time to Redeem

Before you cash savings bonds, ask yourself these critical questions:

Has your bond stopped earning? Once a bond matures and ceases accruing interest, holding it further serves no purpose. Redeeming it allows you to reinvest elsewhere.

Have you owned it long enough? There’s a one-year minimum holding period. If you redeem before five years pass, you forfeit three months of interest as a penalty. Ensure this cost doesn’t outweigh your need for the funds.

Will you reach full value? Some older bonds sold at 50% of face value but mature to their full denomination. Check your bond’s specific terms to confirm you’re eligible for the full redemption amount you expect.

What are your alternatives? Savings bonds provide stability, but compare the guaranteed yield against what you’d earn in high-yield savings accounts, stock market investments, or other options aligned with your risk tolerance and timeline.

Why do you need the cash? Short-term emergencies differ from strategic reallocation. Ensure your redemption decision fits your broader financial plan and long-term goals.

How to Redeem: Your Available Options

Electronic Bonds

If you own Series EE or Series I bonds purchased through TreasuryDirect, redemption is straightforward. Log into your account, initiate the redemption, and specify your linked checking or savings account. The funds deposit within a few business days.

Paper Bonds

For paper bonds, your bank or credit union often can handle redemption if you maintain an active account there. The institution may impose limits on redemption amounts and require identification and documentation. However, redemption eligibility sometimes depends on your account tenure—ask your financial institution about their specific policies.

Older Bond Series

Series HH and other discontinued types cannot be redeemed at a bank. Instead, complete Treasury Form FS 1522, gather your certified signature and direct deposit information, and mail the bond to Treasury Retail Securities Services. Though your bank cannot cash the bond, staff can help you navigate the process and certify your signature.

Special Circumstances

If you inherited a bond from a deceased person’s estate or face other complications, your bank typically can guide you through the redemption process even if they cannot directly cash the bond themselves.

Tax Considerations Before You Redeem

Interest income from savings bonds faces federal income tax but not state or local taxes. Depending on your circumstances, you may also owe federal or state estate taxes, inheritance taxes, gift taxes, or excise taxes on your interest earnings.

You have flexibility in reporting: either report accrued interest annually as it accumulates, or report all interest in the year you redeem the bond. Consult a tax professional to determine which approach minimizes your tax burden and fits your overall financial picture.

Common Questions About Savings Bonds

How are savings bonds different from Treasury bonds? Treasury bonds mature over 20 or 30 years and pay fixed interest every six months. Unlike savings bonds, Treasury bonds can be traded on the open market and require a minimum $100 purchase compared to $25 for savings bonds.

Can someone else cash a bond I own? Yes, if you’re a minor’s parent or designated co-owner, a named beneficiary, or legal representative of the owner. Otherwise, only the registered owner can redeem.

How long until a bond matures completely? Electronic bonds reach full maturity 30 years after issuance, at which point they stop earning interest.

Final Thoughts

Savings bonds represent a reliable building block in a conservative savings strategy. They’ve served generations of American savers well. However, remember that maximizing their benefit requires time—often years—to realize full returns. Before redeeming, ensure you understand your specific bond’s terms, acknowledge any penalties or tax implications, and confirm that redemption aligns with your broader financial objectives. When in doubt, consult your bank or a financial advisor to ensure you’re making the choice that best serves your long-term prosperity.