Learn About Cashing In Your EE Bonds

Understanding EE Bonds: What They Are and How They Work

EE Bonds are savings bonds issued by the U.S. Department of the Treasury. These bonds represent a loan you make to the federal government. When you purchase an EE Bond, you're giving the government money that it uses to fund various operations. In return, the government pays you back with interest over time.

EE Bonds come in two forms: paper bonds and electronic bonds. Paper EE Bonds are physical certificates that you hold in your hand. Electronic EE Bonds exist only in digital form through the Treasury Direct website, a federal government portal where you can manage bonds online. Most new bonds sold today are electronic because they're easier to track and less likely to be lost or damaged.

The way EE Bonds earn money differs from other investments. When you buy an EE Bond, you pay a specific purchase price. The bond then earns interest every month. This interest compounds, meaning you earn money on your money. As of 2024, EE Bonds earn a fixed interest rate that the Treasury sets every six months. The current rate is 4.90% when held to maturity, though rates change regularly.

One important feature of EE Bonds is that they take time to mature. A Series EE Bond reaches final maturity after 30 years. However, you can cash in your bond before it matures. The longer you hold the bond, the more interest it earns. If you cash in a bond very early, you may earn little to no interest.

EE Bonds also offer a unique feature: they're guaranteed to double in value if held for 20 years. This means if you buy a $100 EE Bond today, it will be worth at least $200 in 20 years, regardless of interest rates. This guarantee makes EE Bonds attractive to people who want a safe, stable investment that grows over time.

Practical Takeaway: EE Bonds are low-risk savings tools issued by the federal government where your money grows through interest. Understanding that they take time to build value helps you decide whether cashing them in early makes sense for your situation.

When You Can Cash In Your EE Bonds Without Penalties

EE Bonds can be cashed in at any time after purchase, but the Treasury imposes a penalty if you cash them in during the first five years. This penalty is equal to the last three months of interest you earned. For example, if you bought a bond and earned $10 in interest during the last three months, you would lose that $10 when you cash in the bond before the five-year mark.

After five years, you can cash in your EE Bonds without any penalty. This is the key point where the bonds become truly accessible without losing money. Once you reach the five-year anniversary of your bond's purchase, you have complete freedom to cash it in whenever you choose without the Treasury taking away any interest you've earned.

Many people plan their EE Bond strategy around this five-year window. Some purchase bonds when they have extra money and plan to hold them for exactly five years, knowing they can then access the money without penalty. Others hold them much longer, letting the compound interest work for 10, 20, or even 30 years.

The five-year rule applies to all EE Bonds regardless of when they were purchased. Paper bonds purchased decades ago follow the same rule as new electronic bonds. If you have old paper bonds sitting in a drawer, you can still cash them in after their five-year purchase anniversary without any penalty.

It's important to understand that even though you can cash in bonds before five years without penalty after the five-year mark, the interest you earn will have been less than if you held the bond longer. The Treasury sets interest rates in a way that rewards longer holding periods. However, if you need the money, accessing it without penalty after five years is an advantage that EE Bonds offer compared to some other savings products.

Practical Takeaway: Mark your calendar five years from the date you purchase an EE Bond. Once that date passes, you can cash in the bond anytime without losing any of your earned interest. Before five years, you'll lose the last three months of interest if you cash in early.

How to Cash In Paper EE Bonds

Cashing in paper EE Bonds involves visiting a financial institution that handles these transactions. Most banks and credit unions offer this service to their customers. Some also offer it to non-customers, though policies vary. Call ahead before visiting to confirm that your chosen bank accepts bond redemptions and to learn about their specific procedures.

When you visit your bank or credit union to cash in a paper bond, bring the physical bond certificate and a valid government-issued photo ID. The bank staff will examine the bond to verify it's authentic and check its current value using Treasury records. They'll then complete the redemption paperwork, which involves filling out a form that instructs the Treasury to pay the bond value.

The bank typically deposits the funds directly into your account at that institution. If you want the money in a different account, you may need to transfer it after the deposit clears. The time it takes for the funds to reach your account depends on your bank's processing procedures—typically between one and five business days.

Some banks charge a small fee for this service, though many do not. It's worth asking about fees when you call to confirm they handle bond redemptions. The fee, if charged, might be $5 to $15. While not expensive, it's good to know this beforehand so you can shop around if multiple banks near you handle these transactions.

The Postal Service also redeems paper EE Bonds in some locations. Certain post offices have the authority to cash in bonds, though not all do. You can contact your local post office or search the Postal Service website to find locations near you that offer this service. The process is similar to banks—bring your bond and ID, and staff will handle the redemption.

One thing to remember about paper bonds: the Treasury stopped issuing new paper EE Bonds to most buyers in 2011, though you can still buy them through the Postal Service in limited amounts. This means if you're cashing in a paper bond, it's likely from a purchase made years ago. Even if you've lost track of when you bought it, the Treasury can research your bond and provide details about its current value.

Practical Takeaway: To cash in a paper EE Bond, visit your bank, credit union, or post office with the physical bond and your ID. The institution will verify the bond's value and deposit the funds into your account within a few business days. Call ahead to confirm they handle redemptions and ask about any fees.

How to Cash In Electronic EE Bonds Through Treasury Direct

Electronic EE Bonds, also called digital bonds, are managed through Treasury Direct, the federal government's online portal for buying and managing bonds. If your bonds exist only electronically, you'll cash them in using your Treasury Direct account rather than visiting a physical location. This process takes just a few minutes if you have internet access and your account login information.

First, you'll need to access the Treasury Direct website at treasurydirect.gov. Log in with your username and password. If you haven't set up an account yet but own electronic bonds purchased in your name, you can register on the site using your Social Security number and other identifying information. Once logged in, you'll see a list of all your bonds with their current values.

To cash in an electronic bond, locate it in your account and select the "Redeem" option. Treasury Direct will show you the current value of the bond, including all interest earned to date. Review this information carefully to make sure you're redeeming the correct bond. Some people hold multiple bonds, so double-checking prevents mistakes.

After confirming the redemption details, the system will ask where you want the funds deposited. You'll provide your bank account information—the routing number and account number for the account where you want the money sent. The Treasury will verify this information matches what's on file with your bank. If it doesn't, you may need to update your bank account information in your Treasury Direct profile first.

Electronic redemptions typically process quickly. The Treasury usually transfers funds to your bank account within one to three business days of when you submit the redemption request. You'll receive confirmation that your redemption was submitted, and Treasury Direct will update your account to show the bond as redeemed. The funds will appear in your bank account shortly after.