Introduced in 1935, the United States saving bond has long been a staple for gifts and saving for a child's education. Both the series I bond and the series EE bonds mature at 30 years from the purchase date. After that date, the bonds no longer earn interest. Check the issuance dates of older savings bonds to see if you should cash them in. You are not required to cash in matured bonds, but they no longer grow in value after the maturation date.
U.S. Savings Bonds
U.S residents or citizens living abroad may purchase savings bonds. There are no age restrictions, and even minors may own them. Paper savings bonds were available at virtually any U.S. bank. However, as of January 2012, banks and other financial institutions will no longer sell paper savings bonds. and they will only be sold online. According to the United States Department of the Treasury, "This action supports Treasury’s goal to increase the number of electronic transactions with citizens and businesses."
Series EE Bonds purchased after May 1, 2005 earn fixed return rates, so purchasers can check the worth of the bond at any time. Bonds purchased between May 1997 and April 30, 2005 earn market-based variable return rates, based on the yields of five-year Treasury securities. Electronic EE bonds sell at face value, so a $100 bond costs $100. Paper EE bonds sell at half the face value, so a $100 bond costs $50. Unlike the electronic EE bond, the paper savings bond is not worth the face value until maturity. Redemption of EE bonds within five years of purchase results in forfeiture of three months' interest.
I bonds begin earning interest from the first day of the month of issuance. Bondholders may redeem them after holding them at least one year. Any interest is added monthly, payable when the bond is redeemed. I bonds are sold at face value amounts. These bonds grow in value for up to 30 years, with earnings indexed for inflation. If redeemed before the fifth anniversary of the purchase date, there is a three month's interest forfeiture penalty.
I Bond Rates
I bonds have both a fixed and inflation rate for earnings. The U.S. Secretary of the Treasury announces the fixed rate each May and November, with application to any bonds issued in that six-month period. This rate remains fixed for the bond's life, and is always greater than 0 percent. The inflation rate is also announced in the same months, and is based on the Consumer Price Index. The two rates combine for determination of the bond's earning rate for those particular six months.
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