Why Do Maturity Dates on Series EE Bonds Vary By Issue Year?

An Explanation of Why Series EE Bond Maturities Fluctuate From Time to Time

Series EE Savings Bond Maturity Dates
Some Series EE savings bonds mature in a few years, others in several decades. What determines the difference? It all comes down to the interest rate earned on your Series EE savings bonds. The higher the interest rate, the sooner the maturity. Douglas Sacha / Moment Open / Getty Images

Have you ever wondered why different Series EE savings bonds mature at different dates? For example, the EE bonds issued in 1981 and 1982 took only eight years to reach full face value, yet the same EE bonds issued in 2003 took twenty years to reach face value. These drastically different maturity dates are the result of the rate of interest earned on each Series EE bond when it is issued.  This happens because these savings bonds are a type of so-called "zero coupon bond" in which bond coupons are added to the bond's value rather than paid out as a check or direct deposit.

Instinctively, you already know this because:

1.) You learned in the Series EE Savings Bond Guide that the paper certificate version of Series EE savings bonds are issued at half of face value. A $100 Series EE bond, for instance, would cost you $50 at the time you bought it. This is different from electronically purchased Series EE bonds bought through the TreasuryDirect program, as well as all Series I savings bonds.

2.) You also learned in Series EE Savings Bonds Interest Rates that the Treasury Department periodically changes the rules for how interest is calculated for savings bonds for new bonds issued after a certain date.

In 1982-1983, interest rates were extremely high. In 2003, interest rates were extremely low. Thus, it took less time for the 1982-1983 bonds to compound from their cost (half of face value) to their full face value. It took more time for the same thing to happen to the bonds issued in 2003 because the interest rate was so low.

One way to calculate this is to use the Rule of 72. This simple tool lets you calculate how long it would take to double your investment at a given rate of return. For instance, if you bought a new Series EE savings bond today with a $1,000 face value (your cost $500) that earned a fixed rate of 1.20%, the active rate as of the day this was published, how long would it take to reach maturity value?

Simply take 72 divided by 1.2. The answer, 60, is the total years necessary for the bond to double in value.

By looking at the savings bonds in this light, you are better equipped to decide if they are right for your portfolio. You could buy broadly diversified blue chip stocks and earn at least 3% or 4% on your money. Are you willing to watch your account value fall in half, or double, depending on the stock market? If you are in it purely for the cash income and you don't mind volatility, stocks may be a much better option. Only you and your professional adviser can decide what works based on your own needs, resources, and personality. Arming yourself with knowledge makes that decision easier.

Discover More About Series Series EE Savings Bonds and the Role They Might Play In Your Investment Portfolio

For more information, visit our Series EE Savings Bond Guide. You can also learn about Series I Savings Bonds, which offer inflation protection. You can also read our savings bond guide for new investors, featuring a history of savings bonds in the United States, an explanation of tax considerations, and more.