Time to Cash in Your U.S. Savings Bonds?

U.S. savings bonds can be a great investment. They are safe, offer a fixed interest rate, and are not subject to state or local income taxes. Whether you received U.S. Savings Bonds as a gift from your grandparents or bought them through a payroll deduction on your first job, you may own U.S. Savings Bonds that have stopped earning interest.

It is relatively simple to cash in savings bonds that have matured and are no longer earning interest. If you need access to cash, even bonds that haven't reached maturity may be worth turning in. If you are struggling with debt, cashing in a bond is a good way to pay it off, even if the bond is cashed in early. Most bonds can be cashed in after one year, but you will lose three months' worth of interest if you cash them in before five years. If you are holding hundreds of dollars in savings bonds, you will still get them back at their current value.  

Series EE Bonds 

Series EE Bonds, the standard variety first issued in 1980 and still being issued today, were designed to pay interest for up to 30 years. So any bonds dated 1989 or earlier—the first generation, so to speak—will have stopped paying by the end of 2019. At that point, their value is frozen, so there is no reason other than nostalgia to hang onto them. Instead, you can cash them in and put the money to more productive uses.

Before the advent of Series EE Bonds, your grandparents might have bought you a Series E Savings Bond. Those were issued from 1941 to 1980, and all of them have stopped earning interest, too.

Series I Bonds 

The more recent Series I Bonds—the kind that pays a combined fixed and inflation-adjusted rate—were first issued in 1998. They're good for 30 years, so the earliest of them will stop paying interest in 2028.

How much unclaimed money is out there in the form of savings bonds that have stopped earning interest but have yet to be redeemed? The U.S. Treasury Department estimates that it’s billions of dollars.

Other Bonds

There are other bonds out there. Including Series HH Savings Bonds, which were issued between 1980 and 2004, and then discontinued. These HH bonds had a 20-year maturity rate, so they could still be earning interest if you bought a bond in the later years.

Series HH are more difficult to cash in than other bonds, as you must send it to Treasury Retail Securities Services along with a specific form, and you can't cash in these bonds at a bank, unlike some others.

There are also Patriot Bonds and Gulf Coast Recovery Bonds. These two types of bonds tied to moments in U.S. history are no longer sold but may have a cash value and/or earning interest. There are also Armed Forces Leave Bonds, which were issued as compensation for accumulated leave and paid out to members and former members of the Armed Forces who served in World War II.

What Are Your Bonds Worth?

To determine the value of your old bonds, you can use the Savings Bond Calculator on the TreasuryDirect website. You'll need the type of bond, its denomination, and the date it was issued. There's also a place to type in your bond’s serial number, but you don’t need that to get a value. The calculator's answer may pleasantly surprise you. For example, a $50 bond issued in August 1982, for which someone would have paid $25, is now worth $146.90. A $100 bond from February 1984 is good for $230.64. 

If you believe you own some old savings bonds but have lost track of them, you may be able to file a claim for the bonds with the Treasury by filling out Fiscal Service Form 1048, Claim for Lost, Stolen, or Destroyed United States Savings Bonds. Unfortunately, the popular online tool, Treasury Hunt, was discontinued in early 2017.

There are rules about cashing in bonds. For example, if you hold electronic bonds in TreasuryDirect, you must cash a minimum of $25 or any amount above it in 1-cent increments, and if you only cash a part of a bond's value, say $25 of a $100 bond, you have to leave $25 or more in your Treasury Direct account. When you cash a bond, your money is made up of interest on the bond and the principal amount.

There are some different rules for paper bonds, which vary depending on the type of paper bond you own. For example, some financial institutions won't cash bonds; others will. If you mail in your paper bonds and send them directly to Treasury Retail Securities Services, the website says it will cash them if you meet all the requirements for cashing them in with the Treasury. While electronic bonds can be split up, if you own individual paper bonds, you have to redeem them for the total amount of the bond.

How to Cash in

You can redeem your old paper bonds at many banks and other financial institutions. The TreasuryDirect website doesn't maintain a list but suggests you call around. Bear in mind that savings bond interest is subject to federal income tax but not state or local tax. 

You can either report it and pay tax every year that you hold the bond or wait until the end and pay the tax all at once, as most people do. After redeeming your bonds, you’ll receive an IRS Form 1099-INT, reflecting your taxable gain.

An exception, in some instances, is if you use the proceeds from bonds issued in 1990 or later to pay for qualified higher-education expenses for yourself or your child.

As previously mentioned, if your bonds are electronic, you can cash your bonds out in full (with a minimum of $25), but if you cash only a portion of a bond's value, you have to keep $25 in your TreasuryDirect account, Paper bonds cannot be split up like electronic bonds. You can log into your TreasuryDirect account to cash your electronic savings bonds. The cash amount you earn from your bond can be credited to a savings or checking account via your TreasuryDirect account. The transaction usually takes approximately two business days from the day you redeemed them online.

There are rules around when you can cash in a savings bond, and they usually depend on the type of bond issued. For the most part, you must have owned the bond for an entire year, i.e., at least 12 months from the date the bond was purchased, to cash it in. After the one-year mark, you can go ahead and cash in your bond, but you will get hit with a penalty of three months' interest earned on the bond. 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.

The Bottom Line

Don't sit on cash that's coming to you, but before you cash in your bonds, it's a good idea to record what the Savings Bond Calculator says they're worth to ensure you get every dollar you're owed.

Be prepared to pay taxes on the interest earned on your bond when you cash it out, and if you are nervous about a large tax bill at the end of the bond's earning life (say 20 or 30 years), it may make sense to pay to taxes each year on the interest earned. Ask your bank or credit union if you can cash out your paper bonds, and make sure to set up an account with TreasuryDirect if you purchase or are given electronic bonds to cash them quickly. But don't try to cash them out too early (before five years) because you will be hit with a penalty.