The greatest savings bonds for presents, retirement planning, and portfolio diversification are Series EE Savings Bonds. These bonds can be purchased in any quantity to the penny between $25 and $10,000, with a maximum purchase of $10,000 per year per Social Security Number. Investors can buy them directly through Treasury Direct, either as a one-time purchase or as periodic payroll deductions. Only electronic versions of Series EE Bonds are available.
Series EE Savings Bonds have different interest rates depending on when they are purchased. Interest rates are currently at 0.10 percent (as of January 2022). Every May 1 and November 1, the US Treasury Department changes the rates on new bonds. The interest rate on a savings bond is fixed until it matures 30 years later.
Because they are guaranteed to double in value if kept for at least 20 years, Series EE Savings Bonds are a terrific choice for presents, retirement planning, and diversification. The US government will make a one-time adjustment to meet this pledge, even if the interest rate is low. This guarantee gives investors peace of mind when it comes to retirement planning or diversifying their portfolios with less hazardous investments.
A Series EE Savings Bond cannot be sold unless it has been held for at least one year. It becomes entirely liquid after that and can be cashed at any time. There is a three-month interest penalty if you redeem the savings bond during the first five years. There are no more fines after five years.
Savings bond interest is not taxed until the bond is redeemed. The earnings are subject to federal income taxes, but they are free from state and local taxes. When used to pay for higher education expenses, the earnings may be tax-free.
When is the best time to cash in my EE Savings Bonds?
In about 30 years, most savings bonds stop earning interest (or achieve maturity). A savings bond can be redeemed as soon as one year after purchase, but it’s normally best to wait at least five years so you don’t miss out on the last three months of interest. If you redeem a bond after 24 months, for example, you will only receive 21 months of interest. It’s usually better to wait until your bond reaches full maturity, depending on the interest rate and your individual financial demands.
What is the value of a $50 EE savings bond at maturity?
Savings bonds are regarded as one of the most secure investments available. The underlying principle is that the value of a savings bond grows over time, but it’s easy to lose track of how much it’s worth over time.
The TreasuryDirect savings bond calculator, fortunately, makes determining the value of a purchased savings bond a breeze. You’ll need the bond series, face value, serial number, and issuance date to figure out how much your savings bond is worth.
If you bought a $50 Series EE bond in May 2000, for example, you would have paid $25. At maturity, the government committed to repay the face amount plus interest, bringing the total value to $53.08 by May 2020. A $50 bond purchased for $25 30 years ago is now worth $103.68.
EE or I Savings Bonds: Which is Better?
If an I bond is used to pay for eligible higher educational expenses in the same way that EE bonds are, the accompanying interest can be deducted from income, according to the Treasury Department. Interest rates and inflation rates have favored series I bonds over EE bonds since their introduction.
Can EE bonds depreciate in value?
NEWS: The new Series I savings bonds have an initial interest rate of 7.12 percent. I bonds can be purchased at that rate until April 2022.
- Is it necessary to get my signature certified if I cash my bonds by mail using FS Form 1522?
- Does it make sense to cash my old I bonds that were issued at a lower rate and acquire new I bonds when the interest rate on new I bonds is high?
- How can I find out what my I bond’s current interest rate and redemption value are?
- I observed savings bonds were being auctioned on auction sites like eBayTM, but I assumed they were non-transferable. What is the mechanism behind this?
If I cash my bonds by mail, using FSForm 1522, must I have my signature certified?
It is debatable. You can send us a copy of your driver’s license, passport, state ID, or military ID instead if the current redemption value of your bonds is $1,000 or less.
When the interest rate on new Ibonds is high, does cashing my old I bonds that were issued at a lower rate andbuying the new bonds make sense?
Notnecessarily. Your I bond’s rate fluctuates every six months, and it may be higher now than when you first bought it. A new I bond had a rate of 3.54 percent in May 2021, for example. A new I bond has a rate of 1.38 percent in November 2013. In May 2021, however, the bond issued in November 2013—which had a rate of 1.38 percent at the time—had a rate of 3.74 percent. It has a higher interest rate than the bond due in May 2021.
How canI find the current interest rate and current redemption value of my I bond?
Go to your TreasuryDirect account to order an electronic I bond. Use the Savings BondCalculator to calculate a paper I bond.
How is the interest rate of an I bond determined?
- A fixed rate of return that does not change over the life of the I bond.
- Variable semiannual inflation rate for all urban consumers based on changes in the Consumer Price Index (CPI-U). The rates are announced by the Bureau of the Fiscal Service every May and November. The difference between the CPI-U statistics from the preceding September and March is the semiannual inflation rate announced in May; the difference between the CPI-U figures from the preceding March and September is the inflation rate announced in November.
The interest rate on an I bond is sometimes referred to as the composite rate or the overall rate because it combines two rates.
When are earnings added to the I bond?
I bonds gain value on the first of every month, and interest is compounded semiannually based on the issuance date of eachI bond. The issuance date of an I bond is the month and year in which the bond is fully paid.
What is the difference between EE and I bonds?
The EE bonds we sell now have a set rate of interest and are guaranteed to double in value in 20 years, regardless of the rate. Today’s I bonds earn a variable rate of interest that is linked to inflation; as inflation happens, the bond’s value rises. An I bond’s value isn’t guaranteed to rise to a set level.
Are there tax benefits to using I bonds to finance education?
Yes. You may be able to totally or substantially exclude savings bond interest from federal income tax under the Education Savings Bond Program. When you pay qualified higher education expenses at an eligible institution or through a state tuition plan in the same calendar year that you redeem eligible I and EE bonds issued in January 1990 or later, this can happen. When purchasing bonds, you are not needed to state that you intend to use them for educational purposes, but you must ensure that the program’s conditions are completed; some apply when the bond is purchased (s). See IRS Publication 970, “Education Tax Benefits.”
Electronic bonds as gifts
You can buy an electronic I bond as a gift for someone and keep it in your TreasuryDirect account’s “Gift Box” until you’re ready to give it to them.
Before you can give savings bonds as gifts, you must keep them in your TreasuryDirect account for at least five working days. Treasury is protected against loss by the five-day hold, which ensures that the ACH debit has been performed satisfactorily before the cash can be moved.
You must submit the recipient’s Social Security Number if you buy an electronic I bond as a gift. To be able to transfer the bond to the gift receiver, they must first open or already have a TreasuryDirect account. A parent must open a TreasuryDirect account and link it to a Minor Linked account if the receiver is a minor. The gift bond will be delivered to the Minor Linked account. If the receiver does not have a TreasuryDirect account, you may keep an EE or Ibond that you bought as a gift until it matures.
Paper I bonds as gifts purchased with your IRS tax refund
I bonds make excellent gifts for a variety of events. A paper I bond can be mailed to you using your tax refund so that you can personally hand it to the receiver. Download a gift card when you purchase the I bond. On the I bond, the word “gift” will not display.
If you’re buying an I bond as a gift and don’t know the recipient’s Social Security number, just use your own. Despite the fact that your number will be printed on the bond, you will not be charged any taxes, and it will not go against your yearly purchase limit. The Social Security Number is only needed to trace the savings bond in the event that it is lost, stolen, or destroyed.
How do I file a claim for lost, stolen, or destroyed paper I bonds?
Write to Treasury Retail Securities Services, PO Box 214, Minneapolis, MN 55480-0214 to file a claim. You’ll have to fill out FS Form 1048. (download or order).
Before we can look for your security record, we need the following information:
- serial number of the bond — If you don’t have the serial number for the bond, submit all of the following information, which may be on the bond(s):
Where can I bonds be redeemed?
You can redeem electronic I bonds through the TreasuryDirect program if you have them. You can cash paper I bonds at some local financial institutions or by mail if you own them.
When can I cash (redeem) an I bond if I need the money?
After 12 months, you can cash in your Series I bonds at any time. You’ll get your original purchase price plus any interest earned. I bonds are supposed to be held for a longer period of time; if you redeem one inside the first five years, you will forfeit the last three months’ interest. If you redeem an I bond after 18 months, for example, you’ll get the first 15 months of interest back.
Can EE or E bonds be exchanged for I bonds?
No, but you can sell your EE or E bonds and use the money to purchase I bonds. The interest on the EE or E bonds must be declared on your federal income tax return for the year they were cashed.
What are Gulf Coast Recovery Bonds?
From March 29, 2006, through September 30, 2007, Gulf Coast Recovery Bonds were issued. This special I bond designation was made to encourage continuing public support for hurricane recovery activities in the region. A clause in the Gulf Opportunity Zone Act of 2005 encouraged Treasury to make this designation. The proceeds from the sale of savings bonds went into the Treasury’s general fund and were spent pursuant to appropriations authorized by Congress and signed into law by the President, including those for Gulf Coast rehabilitation.
I noticed savings bonds are being sold through auction sites such as eBayTM, but I thought ownership was non-transferable. How does this work?
Savings bonds are sometimes marketed as collectibles or souvenirs. Because a savings bond is a registered security and ownership is non-transferable, the sale has no effect on the savings bond’s ownership. The owner or co-owners named on the bond still have a contractual connection with the US Treasury, not the individual who acquired the bond at auction. As a result, the person who purchases it at auction is unable to cash it; instead, he is purchasing a piece of paper displaying a bond that remains the property of the owner or co-owners specified on the bond. If the bond was lost and has since been replaced, it may be the property of the United States Treasury. Bottom line: Buying a savings bond at an auction is a bad idea because you don’t get any title or ownership rights to the bond.
After 30 years, what happens to EE bonds?
Interest is paid on EE bonds until they reach 30 years or you cash them in, whichever comes first. After a year, you can cash them in. However, if you cash them before the 5th year, you will forfeit the final three months’ interest.
What is the best way to avoid paying taxes on EE bonds?
Cashing your EE or I bonds before maturity and using the money to pay for education is one strategy to avoid paying taxes on the bond interest. The interest will not be taxable if you follow these guidelines:
- The bonds must be redeemed to pay for tuition and fees for you, your spouse, or a dependent, such as a kid listed on your tax return, at an undergraduate, graduate, or vocational school. The bonds can also be used to purchase a computer for yourself, a spouse, or a dependent. Room and board costs aren’t eligible, and grandparents can’t use this tax advantage to aid someone who isn’t classified as a dependent, such as a granddaughter.
- The bond profits must be used to pay for educational expenses in the year when the bonds are redeemed.
- High-earners are not eligible. For joint filers with modified adjusted gross incomes of more than $124,800 (more than $83,200 for other taxpayers), the interest exclusion begins to phase out and ceases when modified AGI reaches $154,800 ($98,200 for other filers).
The amount of interest you can omit is lowered proportionally if the profits from all EE and I bonds cashed in during the year exceed the qualified education expenditures paid that year.
What is the value of a $100 savings bond dated 1999?
A $100 series I bond issued in July 1999, for example, was worth $201.52 at the time of publishing, 12 years later.
What is the value of a 1991 Series EE bond?
3. Do my old savings bonds pay me any interest?
After 30 years, a Series EE savings bond ceases earning interest, so a 1990 savings bond will continue to receive income until 2020.
In July 2016, a $100 Series EE savings bond purchased in January 1991 would be worth $173.52. The bond, which cost a saver $50 at the time of purchase, will mature in January 2021. It currently has a 4-percentage-point interest rate.
When $17.6 billion in bonds were auctioned in 1992, a surplus of savings bonds was purchased. So, when those 1992 bonds stop collecting income in 2022 — just six years from now — savers will want to pay attention.
4. Is there an alternative to searching through shoe boxes and other hiding places to track bonds?
This online system is limited, but it can assist you in tracking down information on some no-longer-paying savings bonds issued after 1974.
You enter your Social Security number into Treasury Hunt and are then notified whether you have any savings bonds that are no longer producing interest. You’ll need to file a Form FS 1048 if you can’t discover the bonds or believe they’re missing.
If you live in a location that has been affected by a flood or other calamity, keep an eye out for special breaks on lost bonds. For example, the federal government said in July that it would expedite the replacement of lost bonds in West Virginia communities affected by mudslides and floods.
5. Do you have to pay taxes on your savings bonds in the United States?
You’re only taxed on the amount of interest you earned, not the whole amount you get when you cash the bonds. Granted, a large portion of the money you get from an old savings bond is interest.
An IRS Form 1099-INT would be issued to you. Keep your paperwork until you’re ready to file your taxes. Many banks can cash savings bonds; working with a bank with whom you already have an account can be more convenient.
Some tax advice: Don’t fool yourself into thinking you can use savings bonds issued in 1986 to pay for a child’s college education while avoiding paying federal income taxes on the interest you receive. The preferential tax deduction for higher education expenses only applies to qualifying Series EE and I Bonds issued after 1989 if certain conditions are met.
One reader suggested that you donate all of your savings bonds to charity to avoid paying taxes. No, in a nutshell.
“You can’t give US savings bonds to a charity during your lifetime or even as a beneficiary upon death,” said George W. Smith IV, an accountant in Southfield.
On the plus side, Smith pointed out that the interest earned on a U.S. savings bond is not taxed by Michigan or any other state or territory.
Are EE bonds a good investment?
Because they give a guaranteed rate of return and, even if interest rates are lower, the savings bond will be worth twice its face value after 20 years, Series EE Savings Bonds are the finest gift, retirement planning, and portfolio diversification option.
What’s the distinction between I and EE bonds?
Series I bonds and series EE bonds are the two categories of savings bonds now offered by the US Treasury. Whether you choose one over the other is determined by current interest rates as well as your expectations for future interest rates and inflation.
EE Bond and I Bond Similarities
- Both EE and I bonds are sold at face value and pay monthly interest that is compounded semiannually for a period of 30 years.
- After 12 months, both I and EE bonds can be redeemed or cashed. If you cash it during the first five years, you’ll be charged three months’ interest.
- Both are totally tax exempt if used to pay for qualified higher education expenses and are exempt from state and local taxes.
EE Bond and I Bond Differences
- EE bonds have a fixed interest rate for the duration of the bond, whereas I bonds have rates that are changed to protect against inflation.
- If kept for 20 years, EE bonds provide a guaranteed return that doubles your investment. With I bonds, there is no certainty of a profit.
- Individual EE bond purchases are limited to $10,000 per year, whereas I bond purchases are limited to $15,000 per year.
Scudillo advises investors to note that series EE bonds are guaranteed to double in value over the course of 20 years, but series I bonds have no such guarantee. If interest rates and inflation remain low, EE bonds, which are guaranteed to double in value every 20 years, may be the best option. Given the lower trending inflation rates over the last few decades, doubling your money would take longer. However, if inflation rises significantly, I bond holders will come out on top. Regrettably, the only method to determine which bond earns more over time is to look backwards.