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How and When to Cash in Savings Bonds

Key Takeaways

  • Savings bonds were created as a long-term investment for individuals (such as children) to save in a low-risk fashion.
  • Most savings bonds stop earning interest in about 30 years.
  • You can cash a savings bond at a financial institution and either keep the funds or put them in another savings vehicle to continue to earn interest.

Savings bonds have been a popular way for Americans to save since 1935 and are a great way to set aside money for family members. Many people received them as children but are unsure how or when to cash their savings bonds in order to get the maximum rate of return. If this describes you, use this guide to learn how, where, and when to cash savings bonds — and what to do with the funds.

Learn more about how to cash in savings bonds below to determine if now is the right time to redeem and reinvest the ones you have set aside.

What are savings bonds?

Savings bonds, specifically EE/E series bonds, were created as a long-term investment allowing individuals to save in a reliable, low-risk fashion. They are government-backed, available in denominations ranging from $25 to $10,000, and bonds issued after April 2005 have a fixed interest rate (older bonds [1997-2005] have a variable interest rate).

Anyone who is over 18 and legally competent with a valid Social Security Number, U.S. bank account, and U.S. address of record can purchase savings bonds. They are available to be cashed in after a single year, though there is a penalty for cashing in within the first five years. Otherwise, you can keep savings bonds until they fully mature or stop earning interest, which is generally 30 years.

You may find you have an I or HH/H series savings bond, which have a slightly different structure than EE/E bonds. Only EE and I bonds are still issued, but that doesn't mean you can't still cash in other savings bonds. For instance, if you have an H bond, it's no longer earning interest and is a primary candidate for redemption. HH and I bonds may still be earning interest based on the issue date.

How can you tell when to cash in your savings bonds?

Most savings bonds stop earning interest (or reach maturity) in about 30 years. It is possible to redeem a savings bond once it reaches one year, but it's usually wise to wait at least five years or you will lose the last three months of interest when you cash it in. In fact, depending on the interest rate on your bond and your own financial needs, it's generally beneficial to wait until they fully mature to redeem them.

Check online to determine when your individual savings bonds stop earning interest and are strong candidates for redemption. In some cases, bonds can be called before their maturation date, which means they are no longer earning interest (like H bonds). Or, you may have bonds spanning several years, some of which have reached maturity while others still have a few more years to go. If you want to cash in the maximum value of your savings bonds, it's important to know the status of your bonds and check for updates regularly.

How to cash in savings bonds

If you still have paper savings bonds (newly-issued bonds are electronic, and paper bonds can be converted to electronic bonds), take them to your financial institution along with a photo ID for verification purposes. There, you can exchange the savings bonds for their cash value; you can then choose to put this money into any savings account or use it for your current expenses. If you have an electronic bond, you can redeem the bond online and have it transferred to your checking or savings account within two business days.

Check with the Treasury Department for any updates to the rules about how to cash savings bonds.

Tax considerations when cashing in savings bonds

If you are cashing in your savings bond, make sure you keep a record for tax purposes. This is especially important if the bond has already stopped earning interest as — according to IRS rules — once a bond stops earning interest, the interest earned over the entire life of the bond must be reported on your tax return.

Continue to grow your savings after you redeem bonds with CDs or MMAs

There are many reasons to cash in savings bonds, including making a major purchase or paying down debt like student loans, mortgages, car payments, and more. However, if your savings bond has ceased to accrue interest and you wish to continue to grow your savings, a certificate of deposit (CD) or money market may be an option to deposit the funds.

More information

We are committed to helping you reach your potential by providing personalized solutions. Our dedicated colleagues can help you find the right product to match your needs. To learn how to put cash from a savings bond into a savings account, please call 1-877-360-2472, visit us online, or Ask a Citizen at your nearest Citizens Bank branch.

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