How Do I Redeem My Savings Bonds?

Close-up of two Series EE Bonds, one worth $500
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Savings bonds are a popular way to save money safely while earning some interest. Issued by the federal government, savings bonds are among the least risky bonds available to individuals.

Once you’ve purchased a bond and held it for a minimum amount of time, you have the option to redeem it. When you redeem a bond, you’ll get back the amount you paid for it plus any accrued interest.

This article will cover the basics of savings bonds and how you can redeem them.

What Are Savings Bonds?

A U.S. savings bond is issued by the federal government. When you buy a savings bond, you’re making a loan to the government. In exchange, the government pays interest on the bond. When you redeem a bond, you’ll get all of the interest you’ve earned plus the money you initially lent to the government.

Savings bonds are different from Treasury bonds, which have higher investment minimums and can be traded with other investors.

There are two main types of savings bonds: EE bonds and I bonds.

EE bonds

EE bonds pay a fixed interest rate. Once you buy the bond, the interest rate will remain the same for the life of the bond, even if market rates change. The interest rate for newly issued EE bonds is set every six months. Any bonds bought during the same six-month period will have the same interest rate.

EE bonds purchased between May 1997 and April 2005 have a variable interest rate.

You can purchase EE bonds in amounts as small as $25 and up to $10,000 each calendar year. You must hold your EE bonds for at least 12 months before you redeem them, but they will continue to earn interest for up to 30 years. Redeeming an EE bond before five years have passed from the purchase date will incur a penalty equal to three months’ interest.

The interest you earn from an EE bond is taxed by the federal government but is tax-exempt at the state and local levels.

I bonds

I bonds are savings bonds that have a variable interest rate. The interest rate of each bond is a combination of:

  • A fixed rate set when you purchase the bond, and 
  • A variable rate that is based on inflation and set twice per year

For example, say you purchase an I bond with a fixed rate of 0.1% and the Treasury sets the semiannual inflation interest rate at 1.5%. The bond will pay 1.6% interest for that six-month period. 

If inflation is negative, the Treasury will not allow that to bring the bond’s overall interest rate below 0%.

I bonds are subject to the same minimums and restrictions as EE bonds. You can purchase them in amounts starting at $25, with a limit of $10,000 per calendar year. You can redeem the bonds after owning them for at least a year—but you will pay a penalty equal to three months’ interest if you hold them for fewer than five years. Like EE bonds, they continue to earn interest for up to 30 years.

Interest from I bonds is taxable at the federal level, but tax-free at the state and local levels.

How Do I Cash Paper Savings Bonds?

To cash a paper bond, the easiest thing to do is bring the bond to your local bank or credit union. You’ll need:

  • The bond
  • Proof of identity
  • The death certificate of the owner if you’re the payable on death (POD) beneficiary

If you cannot cash paper bonds at your local bank, you can mail them to the U.S. Treasury Department to cash them. Download and send a signed FS Form 1522 to the government along with your bonds. The government will deposit the money directly into your bank account.

The Treasury has largely stopped issuing paper bonds. However, you can still buy paper I bonds by asking the government to sell you the bonds when filing your federal tax return.

How Do I Redeem Savings Bonds Electronically?

To redeem electronic savings bonds, you’ll need to sign in to your TreasuryDirect account. From there, select the “ManageDirect” menu and click on “Redeem securities.”

From that screen, you can select up to 50 bonds to redeem at once. Then you have two options: You can let the funds remain in your TreasuryDirect account so you can use them to purchase additional bonds, or you can have them sent to your bank.

If you choose to have the funds deposited in your bank account, the amount should be credited  within two business days of the redemption date.

What Are the Tax Implications of Redeeming Bonds?

Redeeming bonds does create a tax liability. The interest that you earn is taxable at the federal level but is exempt from any state and local income taxes.

Savings bonds are also subject to federal and state inheritance, gift, and excise taxes if you are inheriting or receiving the bond from someone else.

Frequently Asked Questions (FAQs)

How do I redeem a savings bond whose owner is deceased?

If the owner of a savings bond passes away, the payable on death (POD) survivor can redeem the bond using the normal redemption methods detailed above. They can also ask for the bond to be reissued under their own name.

If no survivor is named on the bond, the bonds are worth less than $100,000, and there are no court proceedings related to the decedent’s estate, you can file FS Form 5336 to redeem the bonds. 

If a court is involved or the bonds are worth more than $100,000, the Treasury has specific instructions based on your role in the estate.

How do I redeem a childhood savings bond after marriage?

If your name has changed because you’ve gotten married, you can redeem a savings bond as you normally would. If you’re cashing a paper bond, you’ll have to sign using both your maiden and married names.

How do I redeem a paper savings bond that has been damaged? What if I lost it?

If you have a savings bond that has been damaged or lost, you can still get your money back. You’ll need to file FS Form 1048, which asks for the issue date, face amount, and bond number of the lost or damaged bond. You also have to provide other information, such as how the bond was lost or damaged.

On the form, you can request that the Treasury deposit payment for the bonds into your bank account, or ask the Treasury to issue you a substitute bond.