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When looking into “safe” investments, many people like the idea of using government bonds, since they’re backed by the U.S. government.
Savings EE bonds are a popular type of government bond: They earn a fixed rate of return, and only require $25 to buy. Like other savings bonds, they give consumers an opportunity to earn extra cash through compounded returns.
When you choose Series EE bonds, you have the opportunity to double your investment if you hold them for 20 years. However, the nominal rate is often less than what you’d see with the best online savings accounts. The bonds must be purchased electronically through Treasury Direct.
Let’s take a closer look at how Series EE bond maturities work, and what you can expect when you invest in them.
Maturity dates for Series EE bonds
Currently, Series EE bonds are guaranteed to earn a fixed interest rate for 20 years, which is when the bond matures. At 20 years, the government ensures that you will be paid double the face value of the bond. Although they technically mature after 20 years, since that’s when the guaranteed interest rate ends, these bonds actually don’t expire for 30 years.
“All Series EE bonds expire in 30 years,” says Jim Pendergast, general manager of altLine by The Southern Bank. “This means that the most you have is 30 years to let interest add up and compound, even though, theoretically, you can redeem your bond at any time.”
As long as you cash in your bond at the maturity date, you can guarantee your investment will double. So, if you buy a Series EE bond today for $25, and hold it for 20 years, you can cash it in for $50. The Treasury Department makes an adjustment to the interest earnings if needed.
Historically, though, Series EE bonds have taken less time to mature. Here are the historical maturity dates for Series EE bonds:
- January – October 1980: 11 years
- November 1980 – April 1981: 9 years
- May 1981 – October 1982: 8 years
- November 1982 – October 1986: 10 years
- November 1986 – February 1993: 12 years
- March 1993 – April 1995: 18 years
- May 1995 – May 2003: 17 years
- After June 2003: 20 years
How long to wait to cash Series EE bonds
While you can’t cash Series EE bonds within a year, you can redeem them any time after that. Pendergast points out that the longer you hold your bond, the more likely you are to benefit from it. Just remember, he says, that you’re only guaranteed to see double the face value when you hold the bond until maturity.
You can receive years of “extra” interest by holding the bond beyond the maturity date, but once 30 years have passed, you won’t accrue any extra interest.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it’s a good idea to cash them in because you won’t get any extra benefit.
In some cases, you might actually be better off cashing them in before maturity, Pendergast points out. If you can move the money into a more liquid investment vehicle with higher returns, it might make more sense depending on your goals for the money.
However, know that if you redeem the bond before five years pass, there’s a penalty: you lose the last three months of interest you earned. So, for example, if you cash in a Series EE bond after 2 years, you’ll get to keep the first 21 months of interest.
Interest accrual and compounding on Series EE bonds
Series EE bonds issued since May 2005 accrue interest at a fixed monthly rate, which is compounded semi-annually. If you have bonds bought prior to that, especially paper bonds, the U.S. Treasury offers a savings bond calculator that can help you figure out what you’ve earned — and what your bond is worth today.
When deciding when to cash in your Series EE savings bonds, wait until after the compounding date. You can get an idea of when to expect your interest to be added to your bond with this chart:
|Month of Series EE bond issue||Month (first day) interest will be added|
|January or July||January or July|
|February or August||February or August|
|March or September||March or September|
|April or October||April or October|
|May or November||May or November|
|June or December||June or December|
Are Series EE Savings bonds a good investment?
A Series EE Savings bond could be a good investment if you’re looking for something that’s long term and low risk, since it’s backed by the Treasury and is guaranteed to double its value in 20 years.
However, 20 years to see only two times your initial investment might not help you meet certain goals. “Other vehicles like a 529 savings plan for education or even certain mutual funds offer greater returns with only slightly more risk,” Pendergast says.
Series EE Savings bonds also aren’t a good idea if you’re looking for something with liquidity. They’re not accessible unless you redeem the full value of the bond, and are required to be held for at least a year. For a more liquid (but still low-risk) investment, consider opening a high-yield savings account — many of these accounts are paying rates much higher than the rates on savings bonds.
Carefully consider what you plan to use the money for and its place in your portfolio. If you want a cash component and aren’t concerned about immediate liquidity, Series EE bonds might be the right choice. However, if you’re looking for growth, adding other assets to your portfolio can make sense.
— Miranda Marquit wrote a previous version of this story.