When looking into “safe” investments, many people like the idea of using government bonds since they are considered reliable.
One of the popular vehicles is the Series EE bond, which is a savings bond that pays a fixed rate of interest until maturity. Savings bonds offer you a way to earn a little extra on your cash, thanks to the power of compounding returns.
“These bonds are considered relatively low risk, as well as accessible,” says Jim Pendergast, the senior vice president at altLINE, a division of The Southern Bank Company. “The minimum investment required to buy Series EE bonds is only $25.”
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. Realize, too, that you can only purchase Series EE bonds 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
The maturity dates for Series EE bonds depend on when they were issued. Earlier bonds actually had maturity terms that were shorter than today’s 20-year maturities. The maturity date is the point at which the U.S. government promises to pay you double the face value of the bond, regardless of the yield.
“All Series EE bonds expire in 30 years,” Pendergast says. “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 be 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.
Here are the current 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.
Interest accrual and compounding on Series EE bonds
Series EE bonds issued after 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?
Whether Series EE Savings bonds make good investments depends on your individual circumstances and goals.
“EE bonds are one of the lowest-risk investment choices out there,” Pendergast says. “Its Treasury backing guarantees that the bond’s value will at a minimum double by its maturity rate, which these days means doubling in about 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.
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.