Savings bonds work as zero-coupon bonds. Bond coupons , or interest payments, are added to a bond's principal value rather than paid out periodically. The difference in maturity dates for these bonds results from the differing rates of interest built into each Series EE bond when it's issued. Bonds issued in come with a fixed rate for up to 30 years.
Older bonds issued between and have a variable rate that changes twice a year. Bonds older than that have rates that depend on what year they were purchased. Log in to the Treasury's website to find the value of your electronic bonds, or use its calculator to price your paper bonds. You can also estimate the value of your bond if you know when it was purchased. EE bonds have been purchased at a discount in the past, and they reached face value at maturity.
You pay face value and the bond accrues interest as you hold it if you purchase an EE bond in It grows in value by the amount of interest, or coupons, accrued each year until you either cash it in or it reaches 30 years from its date of issue. The maturity dates for Series EE bonds are:. The U. Treasury guarantees that your EE bonds will reach maturity in 20 years, but some reach maturity sooner. It depends on their built-in interest rate. Check the issue dates before you cash in your bonds.
You can't cash them in within one year of issue. You must hold the bond for at least five years to avoid a penalty. You'll forfeit the last three months' interest if you cash in before five years. Some bonds may have an interest rate that's quite low.
Bonds issued from November through April earn interest at a rate of just 0. The Treasury will sometimes perform a one-time adjustment to bring up the bond's value so you can cash it in for its full amount. This can happen if you hold your bond for 20 years, and it still hasn't reached its full face value. Interest on a bond is fixed. It accrues monthly for bonds issued in May and after.
The interest rate is added every month to bonds issued between May and April Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. The time it takes a savings bond to reach face par value depends on the series of bond and the value at which it was sold. There are presently three different series of U.
In general, though, a savings bond is sold as a zero-coupon bond at a discount, and will reach its full value at its maturity. Therefore, savings bonds mature to their full face value. Roosevelt signed legislation that allowed the U. Department of the Treasury to issue federally backed savings bonds, Series A. After the attack on Pearl Harbor, they were called War Savings Bonds , and the money invested in them went directly toward the war effort.
After the war ended, Americans were encouraged to purchase savings bonds, which provided a way for individuals and families to earn returns on their investments while enjoying the absolute guarantee of the United States government. Series EE bonds mature after 20 years, meaning they can earn interest for that period of time. EE bonds are sold for half of the face value, and the U.
Treasury Department guarantees that they will reach face value after 20 years. If the interest payments don't cause the bond to reach full face value at the end of 20 years, the government will do a one-time adjustment to bring the bond's value to equal face value. It's important to keep in mind, however, that EE bonds must be owned for at least one year before redemption.
If they are redeemed before five years, the last three months' worth of interest is forfeited, but after five years, they can be redeemed with no penalty. The annual interest rate for EE bonds issued from Nov. Series I bonds are sold at face value and mature after 30 years. The composite rate for Series I bonds issued from Nov. This rate applies for the first six months that you own the bond. Series HH bonds are also sold at face value, with bondholders receiving interest payments through direct deposit every six months for the year life of the bond.
If an election is made, all previously accrued but untaxed interest is also reported in the election year. If the election to report the interest annually is made, it will apply to all savings bonds for all future years.
That is, the election cannot be made on a bond-by-bond or year-by-year basis. Using the money for higher education may keep you from paying federal income tax on your interest. One of the principal reasons for buying EE savings bonds is the fact that interest can build up without having to currently report or pay tax on it. When the bonds reach final maturity, they stop earning interest. Series EE bonds issued in January reached final maturity after 30 years, in January That means that not only have they stopped earning interest, but all of the accrued and as yet untaxed interest is taxable in If you own Series EE bonds paper or electronic , check the issue dates.
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