Intro to Series EE Savings Bonds Investing

Customer at Retail Banking Counter Window with Bank Teller
•••

YinYang / Getty Images

Savings bonds have been a popular investment in the United States since 1935. Though there are many types of savings bonds, the Series EE savings bond might be best known.

Series EE bonds are issued by the Department of the Treasury to help raise money to fund the government. They allow investors to buy bonds in small denominations. These are much lower than traditional corporate or municipal bonds, which can require $10,000 or $100,000 per bond.

Key Takeaways

  • Series EE savings bonds allow investors to buy bonds in much smaller denominations than traditional corporate or municipal bonds.
  • There are both electronic EE savings bonds or paper Series EE savings bonds, which work slightly differently.
  • The maturity date for Series EE paper bonds varies depending upon when the bond was issued.
  • If you sell your Series EE savings bonds back to the government within five years, you lose the interest income you were owed for the most recent three months.

What Are the Types of Series EE Savings Bonds?

There are two types of Series EE savings bonds: paper bonds and electronic bonds. These work a little differently from each other.

Electronic Series EE Savings Bonds

Electronic bonds are sold at face value. If you want to invest $50, you will receive a $50 electronic bond. It is worth full value when eligible for redemption.

Electronic bonds can be purchased in amounts of $25 or more, to the penny. If you have $547.32 you want to invest, you can do that. This makes these bonds a great choice for small investors with limited funds.

Purchases of electronic bonds are limited to no more than $10,000 per calendar year. They are issued to a designated account. You won't get a physical paper bond when you buy them.

Physical Paper Certificate Series EE Savings Bonds

As of January 1, 2012, Paper Series EE savings bonds are no longer sold.

They once were sold at half of face value. This means that if you bought a $5,000 face value bond, you would have paid $2,500 in cash.

Paper bonds were once purchased in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. There was a maximum purchase of $5,000 ($10,000 face value) per calendar year.

If you own paper bonds, you can convert them to electronic ones.

How to Make Money With Series EE Savings Bonds

When you buy a Series EE savings bond, you are lending money to the U.S. government. From time to time, the government changes the rules for savings bonds. This means that how they work depends on when you bought them.

According to the Treasury Department, Series EE bonds bought on or after May 1, 2005, are fixed-rate bonds. Those bought during the eight years prior had variable interest rates.

Variable rates can be good in times of inflation. But they can be bad in times of stable economic growth and low interest rates.

Series EE bonds are a type of zero-coupon bond. You won't receive interest income for them.

Instead, the bonds are issued at deep discounts to face value. They then compound to the point that they are worth the face value of the bond on the maturity date.

This is guaranteed by the Treasury. If an EE Bond does not double in value by the 20-year maturity date, the Treasury will make a one-time adjustment to make up the difference.

This guarantee is one of the main differences between the Series EE bond and the Series I.

Series I bonds don't have this guarantee. They come with a fixed rate of return for the life of the bond. They also have a semi-annual rate that adjusts for inflation.

What Are Series EE Maturity Dates?

The unique thing about Series EE savings bonds is that the maturity date for the paper bonds varies. When they mature depends on when the bond was issued.

Bond Issue Date Range: Original Term
 Issue Date  Matures After...
January 1980-October 1980 11 years
November 1980-April 1982 9 years
May 1982-October 1982 8 years
November 1982-October 1986 10 years
November 1986-February 1993 12 years
March 1993-April 1995 18 years
May 1995-April 1997 17 years
May 1997-April 2005 30 years
May 2005-Present 30 years

In other words, if you bought a Series EE savings bond in January of 1983, it would have matured 10 years later. If you paid $2,500 for it, it would be worth $5,000 in January of 1993.

You would never actually receive any money in the mail. Instead, each year the value of the interest you were owed would be added to your bond. This is how it increases in value.

You have the option to keep holding the bond for up to 20 more years. This means that it could be worth far more than face value.

All Series EE bonds reach final maturity 30 years from their issue.

Are There Penalties for Cashing Out Early?

If you sell your Series EE savings bonds back to the government within five years of holding it, you lose the interest income you were owed for the most recent three months.

If you redeem the bonds anytime after five years, there is no penalty. You receive the full value of the interest you are owed on the bonds.

Who Can Invest in Series EE Bonds?

According to the Treasury, there are a few requirements for in Series EE savings bonds. Individuals, including children under 18, must have their own Social Security Number (SSN) and meet any one of the following conditions:

  • United States citizen, whether they live in the U.S. or abroad
  • United States resident
  • Civilian employee of the United States, no matter where they live

Trusts, estates, corporations, partnerships, or other entities must have either a Social Security Number or Employer Identification Number (EIN).

Series EE bonds are owned by whomever they are registered to (either a person or entity). Registration should reflect the name of the owner, the Social Security Number or Employer Identification Number of the owner, and, if applicable, their second-named owner or beneficiary.