Savings bonds are a low-risk way to earn interest on your savings. A savings bond is essentially a loan you make to the government — on which you earn interest for up to 30 years.
Savings bonds originated in 1935 with President Franklin Delano Roosevelt, and there have been many different types over the years. They’ve helped finance government programs and projects, from building roads to funding schools and even financing World War II.
Whether you have decades-old paper bonds or an electronic bond you purchased last year, read on to learn more about the different types of savings bonds and how they each work.
What are savings bonds?
Savings bonds allow the public to lend money to the federal government and receive guaranteed interest in return. The government issues the bonds, and individuals can buy them in any amount ranging from $25 to $10,000 (or $50 to $5,000, if buying paper I bonds).
Savings bonds are considered a risk-free investment. They’re backed by the full faith and credit of the United States government and guarantee interest for up to 30 years.
How do savings bonds work?
Savings bonds are zero-coupon bonds. That means rather than paying out interest incrementally, the owner of the bond receives all of their earned interest at maturity, or whenever they cash in the bond. Savings bonds reach maturity — and stop earning interest — after around 20 or 30 years, depending on the type.
Different kinds of savings bonds can earn either a fixed or variable interest rate. While savings bonds guarantee interest, they do have some limitations. You can’t redeem them until you’ve owned them for at least one year. And if you redeem them within five years, you’ll miss out on the last three months’ worth of interest earnings.
To add to saving bonds’ security, you can only cash bonds that you own, and no one else (unless they’re authorized) can cash your bonds. You can even request a replacement if you lose a paper savings bond.
Savings bonds also have some tax advantages. You don’t have to pay state or local income taxes on your bond earnings, and you may not have to pay federal income taxes if you use the earnings for higher education.
You can buy electronic savings bonds online through the TreasuryDirect website. While paper bonds are less common these days, you can still buy paper I bonds — but the only way to do so is with your IRS tax return.
Types of U.S. savings bonds
There have been many types of savings bonds over the years. Some are still available for purchase, and some aren’t. They vary in how they earn interest, how you buy them, and how you redeem them.
EE bonds
Series EE bonds, or EE bonds, are available to purchase electronically from TreasuryDirect (though you may have paper EE bonds that were purchased before they migrated online). EE bonds can earn interest for up to 30 years, and interest compounds semiannually. As of May 2005, new EE bonds earn a fixed interest rate for 20 years. Any EE bonds you buy now are guaranteed to double in value over 20 years.
You can buy EE bonds for any amount between $25 and $10,000 per calendar year.
To cash in electronic EE bonds, you’ll need a . When it comes to paper EE bonds, you have a couple of options. Some banks cash bonds for their customers, so you can see if your bank offers this service. Otherwise, you can mail in your bonds, along with some paperwork, to Treasury Retail Securities Services. If you’re cashing in more than $1,000, you’ll have to get your paperwork notarized.
I bonds
I bonds earn interest for up to 30 years unless you cash them in earlier. Like EE bonds, interest on I bonds compounds semiannually.
The interest rate for Series I bonds changes every six months. The rate comes from a combination of a fixed interest rate and an inflation rate.
Unlike EE bonds, you can buy electronic or paper I bonds. But the only way to buy paper I bonds is using your IRS tax refund. When you buy an electronic I bond, you’ll receive the interest automatically when the bond matures. But you’ll have to submit your paper bond in order to cash in your earnings.
Electronic I bonds have the same limits as EE bonds — you can buy up to $10,000 worth of bonds per calendar year, with a minimum of $25. However, if you go the paper I bond route, You can only buy between $50 and $5,000 in increments of $50, $100, $200, $500, or $1,000.
Cashing I bonds works the same as cashing EE bonds. You can cash electronic bonds online through TreasuryDirect, and you can cash paper bonds at a bank or by mail.
HH bonds
HH bonds were for sale from 1980 to 2004 and are no longer available for purchase. They earn interest for 20 years, so the last HH bonds will mature in 2024.
Unlike EE bonds and I bonds, there are no electronic HH bonds — they came in paper form with $500, $1,000, $5,000, and $10,000 denominations. HH bonds earn interest every six months and pay interest semiannually via direct deposit. The only way to cash in an HH bond is through Treasury Direct via direct deposit — you can’t cash in at a bank.
Other historical and retired bonds
There are several other retired savings bonds that are no longer available but that you may still have lying around somewhere. These include:
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Series A, B, C, and D bonds
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Series E bonds
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Series F bonds
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Series G bonds
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Series H bonds
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Series J bonds
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Series K bonds
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A variety of bonds for special causes, like Armed Forces Leave Bonds and Postal Savings Bonds
If you have any retired bonds in your portfolio, you can find out what they’re worth and how to redeem them online at TreasuryDirect’s website.