Intro to Series EE Savings Bonds Investing
Savings bonds have been one of the most popular investments in the United States since 1935, and perhaps the Series EE savings bond is the most well known. Issued by the Department of the Treasury to help raise money to fund the government, Series EE savings bonds allow investors to buy bonds in much smaller denominations than traditional corporate or municipal bonds, which sometimes require $10,000 or $100,000 per bond.
Electronic Series EE Savings Bonds
Series EE savings bonds work differently depending upon whether you own electronic EE savings bonds or paper Series EE savings bonds.
Electronic bonds are sold at face value. If you want to invest $50, you will receive a $50 electronic bond, and 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, making these a great choice for small investors with limited funds.
Purchases of electronic bonds are limited to no more than $10,000 per calendar year, and they are issued to a designated account. You will receive no physical paper bond.
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; 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.
Making 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 on savings bonds, so how they work depends on when you purchased them.
According to the Treasury Department, Series EE bonds purchased on or after May 1, 2005, are fixed-rate bonds, while those purchased during the eight years prior had variable interest rates. Variable rates can be good in times of inflation but bad in times of stable economic growth and low-interest rates.
Series EE bonds are a type of zero-coupon bond, which means you never receive interest income. Instead, the bonds are issued at deep discounts to face value and have been calculated to compound to the point that they are worth the face value of the bond on the maturity date, which 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 primary differences between the Series EE bond and the Series I, which offers no such guarantee. The Series I comes with a fixed rate of return for the life of the bond plus a semi-annual inflation-adjusted rate.
The unique thing about Series EE savings bonds is that the maturity date for the paper bonds varies depending upon when the bond was issued, according to this schedule:
Bond Issue Date Range: Original Term—
- 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, in January of 1993. If you paid $2,500 for it, that means it would be worth $5,000 when it reached its maturity date.
You would never actually receive any money in the mail, but instead, each year the value of the interest you were owed would be added to your bond so it increased in value. You have the option to continue holding the bond for up to 20 additional years, meaning that it eventually could be worth far more than face value.
Penalties for Cashing Out Early
If you sell your Series EE savings bonds back to the government within five years of investing, you lose the interest income you were owed for the most recent 3 months. If you redeem the bonds anytime after five years, there is no penalty and you receive the full value of the interest you are owed on the bonds.
According to the Treasury, there are a handful of eligibility requirements to investing in Series EE savings bonds. Individuals, including children under 18, must have their own Social Security Number 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.
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.
TreasuryDirect. "Timeline of U.S. Savings Bonds." Accessed March 23, 2020.
Department of the Treasury. "Introduction to Savings Bonds." Accessed March 23, 2020.
New York State. "Certain Basics of Municipal Bonds." Accessed March 23, 2020.
TreasuryDirect. "Series EE Savings Bonds." Accessed March 23, 2020.
Federal Register. "United States Savings Bonds, Series EE, HH and I." Accessed March 23, 2020.
TreasuryDirect. "Convert Your Paper Savings Bonds Using SmartExchange." Accessed March 23, 2020.
Securities and Exchange Commission. "Zero Coupon Bonds." Accessed March 23, 2020.
TreasuryDirect. "May 2005 and Later (EE Bond Rates and Terms)." Accessed March 23, 2020.
TreasuryDirect. "Comparing Series EE and Series I Savings Bonds." Accessed March 23, 2020.
Department of the Treasury. "Interest Accrual Dates for Series E, Series EE, and Series I United States Savings Bonds, and Savings Notes," Pages 1-2. Accessed March 23, 2020.
TreasuryDirect. "Cashing (Redeeming) EE and E Savings Bonds." Accessed March 23, 2020.
TreasuryDirect. "Buying Series EE Savings Bonds." Accessed March 23, 2020.