Your Complete Guide to Cashing in Savings Bonds: Everything You Need to Know

Savings bonds have long been a go-to option for Americans seeking steady, predictable returns with minimal risk. Whether you’ve inherited bonds, discovered forgotten ones from years ago, or are ready to unlock the value of your current holdings, understanding how to cash in savings bonds is crucial to making the right financial decision.

Why Savings Bonds Still Matter

Issued by the U.S. Treasury and backed by the full faith and credit of the federal government, savings bonds represent one of the safest ways to park your money. Unlike stocks or other volatile investments, bonds deliver consistent interest rates and guaranteed principal protection—making them particularly attractive during uncertain economic times.

The interest you earn is reliable: it’s compounded semi-annually and paid over decades. Current Series I bonds, for instance, are offering attractive rates due to inflation adjustments. But before you rush to the bank with your bond certificate, there’s important groundwork to cover.

The Two Main Bond Types You Should Know

Today, only two types of savings bonds are actively sold: Series EE and Series I. Understanding which one you hold matters because redemption eligibility and value calculations differ.

Series EE bonds operate on a fixed-rate model. You can purchase them electronically starting at just $25, up to $10,000 annually. The government guarantees that your bond will double in value within 20 years. Bonds sold between May and October 2022 earned 0.10% annually, though older variable-rate EE bonds from 1997-2005 still earn around 1.60%.

Series I bonds combine a fixed rate with an inflation component, recalculated twice yearly. This dual-rate approach makes them particularly valuable during inflationary periods. The recent 9.62% rate offered through October 2022 reflects this inflation protection. You can buy electronic Series I bonds in one-penny increments above $25 (up to $10,000 yearly), or paper versions at $50 minimums through tax refunds (capped at $5,000 annually).

Before You Attempt to Cash In Your Bonds

Timing is everything. The Treasury imposes important restrictions that could affect your redemption decision.

The one-year lockout: You cannot access your funds for the first 12 months after purchase, regardless of circumstances. This isn’t a suggestion—it’s a hard rule.

The early withdrawal penalty: Redeem before five years have passed, and you forfeit three months of accumulated interest. While the principal is still yours, this penalty can significantly reduce your effective return.

The maturity question: Electronic bonds purchased today will continue earning interest for 30 years. Older bonds stop earning after 20 years. Once a bond matures and interest ceases, holding it further makes little sense—it’s time to liquidate.

Before deciding to cash in, ask yourself: Is this bond still accruing interest, or has it reached its earning endpoint? Does cashing out align with your broader financial plan, or are you acting on impulse during market anxiety?

Calculate Your Bond’s Current Value

Understanding what your bond is worth right now is non-negotiable. The calculation depends on three factors: the bond type, issue date, and whether it was purchased at face value or a discount.

If you hold electronic bonds through TreasuryDirect, logging into your account instantly reveals current valuations. For paper bonds—especially older ones—the Treasury’s free online calculator on TreasuryDirect is your best friend. Input the series designation, serial number, denomination, and issue date, and you’ll get an exact current value. This step prevents unpleasant surprises at redemption.

The Actual Process: How to Redeem

The redemption method depends on your bond’s form.

Electronic bonds are simplest: log into your TreasuryDirect account, select redemption, and funds deposit into your linked checking or savings account within a few business days.

Paper bonds can often be redeemed directly at your bank or credit union, provided you maintain an account there. However, financial institutions may:

• Impose dollar limits on single transactions
• Require government-issued ID and supporting documentation
• Decline to process extremely old bond series

Older bond series (like Series HH or specialty issues such as Patriot Bonds) require filing Treasury Form FS 1522 and mailing your bond to Treasury Retail Securities Services with a certified signature and direct deposit instructions. Your bank can help certify your signature even if they can’t directly cash the bond.

The Tax Reality You Can’t Ignore

Savings bond interest is federally taxable but exempt from state and local income taxes—an underappreciated advantage. You have two reporting options: declare interest annually as earned, or defer all taxation until redemption.

Depending on your situation, you may also owe federal or state estate taxes, inheritance taxes, or gift taxes. The stakes are real enough to warrant a conversation with a tax professional before cashing in significant holdings.

Making the Strategic Decision

Cashing in a savings bond shouldn’t be reflexive. Instead, treat it as part of your broader wealth strategy. Consider:

• Earning potential elsewhere: Could your money earn higher returns in a high-yield savings account or market investments?
• Timeline alignment: Do you need this capital for short-term expenses, or can it remain locked away?
• Opportunity cost: What’s the true opportunity cost of keeping funds in bonds versus other vehicles?
• Overall financial health: Does accessing this money support or undermine your long-term goals?

Savings bonds serve a specific purpose—providing stable, low-risk returns over extended timeframes. When that purpose changes, or when a bond has exhausted its earning potential, redemption makes sense. But the decision should be deliberate, not desperate.

Quick Answers to Common Questions

What’s the difference between savings bonds and Treasury bonds? Treasury bonds are longer-term instruments (20-30 years) with fixed semi-annual interest payments, tradeable on secondary markets, and requiring $100 minimum purchases. Savings bonds are simpler products designed for individual savers, starting at just $25.

Can you redeem someone else’s savings bond? Yes, if you’re the parent of a minor owner, named as a beneficiary, or hold legal authority over the owner’s estate. Proper documentation is essential.

How much could a 30-year-old bond be worth today? A $25 Series EE bond purchased in 1992 had grown to $103.68 by 2022—more than quadrupling the initial investment. However, value depends entirely on series, issue date, and interest rate environment.

What’s the maturity timeline? Modern electronic bonds reach their 30-year maturity date before interest payments cease. Older bonds typically stopped earning after 20 years.

The bottom line: understanding the mechanics of how to cash in savings bonds empowers you to make informed decisions aligned with your financial objectives. Whether your bonds are fulfilling their purpose or have become dormant, knowing your options—and the implications of each—keeps you in control of your financial destiny.