Do EE bonds really double in 20 years?
About EE bonds
EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.
| Face Value | Purchase Amount | 20-Year Value (Purchased May 2000) |
|---|---|---|
| $50 Bond | $100 | $109.52 |
| $100 Bond | $200 | $219.04 |
| $500 Bond | $400 | $547.60 |
| $1,000 Bond | $800 | $1,095.20 |
All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.
Guaranteed returns. One of the most attractive benefits of EE bonds is the guaranteed return. The U.S. Treasury pledges that these bonds will double in value if held for 20 years, translating to an effective interest rate of about 3.5% per year over that period.
The upshot: Although EE Bonds were a sound investment, paying 90% of the prevailing yield on five-year Treasuries, while providing their owners the additional benefits of a put option and a tax shelter, I Bonds were far superior.
You can get your cash for an EE or I savings bond any time after you have owned it for 1 year. However, the longer you hold the bond, the more it earns for you (for up to 30 years for an EE or I bond). Also, if you cash in the bond in less than 5 years, you lose the last 3 months of interest.
There is no penalty if you simply hold onto the bond after five years. There is value in holding onto most bonds. The longer they mature, the more interest bonds earn.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it's a good idea to cash them in because you won't get any extra benefit.
Hold on to EE bonds for 20 years and the government guarantees you will double your money. This amounts to an effective, unadvertised interest rate of about 3.6 percent, but only if you keep the bonds that long. While I bond yields are now higher, they reset every six months.
Do you have to cash in EE bonds when they mature?
They're available to be cashed in after a single year, though there's a penalty for cashing them in within the first five years. Otherwise, you can keep savings bonds until they fully mature, which is generally 30 years. These days, you can only purchase electronic bonds, but you can still cash in paper bonds.
U.S. Savings Bonds mature after 20 or 30 years, depending on the type of bond: Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity. Series I bonds are sold at face value and mature after 30 years.
If you still have a paper EE bond, check the issue date. If that date is more than 30 years ago, it is no longer increasing in value and you may want to cash it.
Currently, EE bonds reach full maturity after 30 years, but are guaranteed to double in value in the first 20 years. However, maturity dates for EE bonds used to be less than 30 years.
Key Takeaways. Interest from EE U.S. savings bonds is taxed at the federal level but not at the state or local levels for income. The interest that savings bonds earn is the amount that a bond can be redeemed for above its face value or original purchase price.
Once you have set up your account on TreasuryDirect, you can fund your account. Within TreasuryDirect, you can also buy other investments such as Series EE bonds that have historically paid a higher rate but don't hedge against inflation as well as I bonds.
In contrast, an EE bond has a fixed interest rate that's determined at the time you buy it. It also has a guaranteed return. After 20 years, you get double what you paid for it — and, of course, all the interest that has accrued. I bonds and EE bonds must be bought and sold directly through the Treasury.
The bond isn't worth its face value until it matures. (The U.S. Treasury Department no longer issues EE bonds in paper form.) Electronic Series EE Bonds are sold at face value and are worth their full value when available for redemption.
There are two types of savings bonds: Series EE and Series I. Series EE bonds are purchased at a discount to their face value and earn a fixed interest rate for up to 30 years. Series I bonds, on the other hand, are inflation-protected and earn a fixed rate plus an additional rate that is adjusted for inflation.
Where do I cash in a savings bond? You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.
How do I avoid taxes when cashing in savings bonds?
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
TO CASH BONDS FOR A DECEDENT'S ESTATE:
Series EE, Series E, and Series I bonds can be cashed at a local financial institution. Some of these transactions may have to be forwarded for further processing. Series HH and Series H bonds must be sent to one of the addresses shown at the bottom of the following page.
If you cash a paper savings bond by mailing it to Treasury Retail Securities Services, we mail you a 1099 by January 31 of the following year. (You can call us for a duplicate statement, if needed, beginning February 15.)
Savings bond interest is subject to federal income tax; however, taxation can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first. You also have the option of claiming interest annually for federal income tax purposes.
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.
