The best time to cash a savings bond depends on its age, current interest rate, and your financial need

You can cash a savings bond as soon as one year after purchase, but you will lose the last three months of interest if you do. After five years, you keep all accrued interest. The real decision is whether to hold longer for higher returns or cash now because you need the money. Series EE and Series I bonds have different maturity schedules and interest structures, so the math changes depending on which type you own.

The Treasury does not penalise you for cashing early after the five-year mark — you get the full value with no fee. But many people hold bonds longer than they need to because they do not know when the interest stops growing. Understanding when your bond stops earning and what you will actually receive helps you decide whether to keep it or redeem it.

Key Takeaways

  • Series EE bonds stop earning interest after 30 years; Series I bonds stop after 30 years as well, so holding past that point gains you nothing.
  • Cashing within the first five years costs you the last three months of interest, which is a real penalty if the bond is young.
  • Series I bonds adjust their interest rate every six months based on inflation, so the rate you earn in the next period depends on when you cash.
  • You owe federal income tax on the interest when you redeem, unless you used the bond for education and meet specific conditions.
  • Checking your bond's current value on TreasuryDirect before deciding to cash tells you exactly what you will receive.

How the five-year penalty works

If you cash a savings bond before it has been held for five years, the Treasury withholds the last three months of interest. This is not a fee — it is a reduction in what you receive. A bond purchased on January 15, 2020, cashed on March 1, 2024, would lose the interest that accrued from December 15, 2023, to March 15, 2024.

After five years, there is no penalty. You receive the full value including all accrued interest, with no deduction. This is why many people set a mental rule to hold bonds for at least five years before cashing. If you are in a genuine financial emergency before the five-year mark, the penalty is real but usually smaller than the interest you have already earned.

Series EE bonds: when interest stops growing

A Series EE bond earns interest for 30 years from the issue date. After 30 years, it stops earning anything, even if you do not cash it. The Treasury will not automatically cash it for you — it sits in your TreasuryDirect account earning zero percent.

If you own an EE bond that is close to 30 years old, check its exact issue date on TreasuryDirect. If it is within a year of that anniversary, cashing it makes sense because holding longer gains you nothing. The value will not change after the 30-year mark, so there is no reason to wait. You can always reinvest the proceeds into a new Series I bond or another savings vehicle if you want to keep the money in Treasuries.

Series I bonds: rate changes and timing

Series I bonds adjust their interest rate every six months — on May 1 and November 1. The rate you earn depends on when you cash relative to these dates. If a new rate is announced in two weeks and it is higher than what you are currently earning, waiting those two weeks means you lock in the better rate for the next six months.

You can see the current composite rate and the next scheduled rate change on TreasuryDirect. If rates are falling and you expect them to drop further, cashing before the next adjustment protects you from a lower rate. If rates are rising, waiting until after the adjustment date lets you earn the higher rate. This is a minor factor for most people, but it matters if you are deciding between cashing now or in a few weeks.

Like EE bonds, Series I bonds stop earning interest after 30 years. Check the issue date to see how much time remains.

Tax on the interest when you redeem

The interest you earn on a savings bond is subject to federal income tax. You do not pay tax when the interest accrues — you pay it when you redeem the bond. The Treasury will send you a Form 1099-INT showing the interest earned, which you report on your tax return for the year you cash the bond.

You can defer reporting the interest until you redeem if you have not already reported it annually. Many people hold bonds for years without reporting anything, then report all the accumulated interest in the year they cash. This can push you into a higher tax bracket that year, so some people spread redemptions across multiple years to manage their tax bill.

There is one exception: if you used the bond to pay for may have access to education expenses (tuition and fees at an accredited school), you may be able to exclude the interest from income. You must meet specific conditions, including income limits, and you have to report it on Form 8815. This is rare, but if you bought bonds specifically for education, check the IRS rules before you redeem.

Checking your bond's current value before cashing

Log into your TreasuryDirect account and navigate to the "Manage Direct" section. Your bonds are listed with their current value, issue date, and final maturity date. This is the exact amount you will receive if you redeem today. The value shown already accounts for all accrued interest and reflects whether you are within the five-year penalty window.

If you own paper bonds issued before 2003, you cannot see them on TreasuryDirect. You will need to contact a bank or the Treasury to get a value and process the redemption. Many banks will cash paper bonds for you, though some charge a small fee. The Treasury's Savings Bond Calculator can estimate the value of an older paper bond if you know the series, denomination, and issue date.

When to hold longer instead of cashing

If your bond is earning a higher interest rate than you can get elsewhere, holding makes sense. Series I bonds currently earn a composite rate that changes every six months; if that rate is higher than what a high-yield savings account or CD is offering, the bond is the better choice. Series EE bonds have a may provide minimum return, but the rate is usually lower than I bonds.

You should also hold if you are within the five-year window and do not have a pressing need for the money. The three-month interest penalty is real, but it is usually smaller than the total interest you have earned. Waiting until year five eliminates the penalty entirely. If you are at year four and need cash, the penalty is small; if you are at year one, waiting is worth considering.

Frequently Asked Questions

Can I cash a savings bond before one year?

No. The Treasury requires you to hold a savings bond for at least one year before you can redeem it. If you need the money sooner, you cannot access it through normal redemption. Some banks may offer loans against bond value, but this is rare and comes with fees.

What happens if I cash a bond right before it stops earning interest?

You receive the full value including all accrued interest. There is no penalty for cashing at or near the 30-year maturity date. In fact, cashing at that point is the right move because the bond will earn nothing after that date.

Do I have to report the interest on my taxes the year I cash the bond?

Yes. You report the total interest earned (shown on Form 1099-INT) on your tax return for the year you redeem. You can choose to report interest annually while you hold the bond instead, which spreads the tax burden, but most people wait until redemption.

What if I lose my TreasuryDirect password and cannot see my bond values?

You can reset your password on the TreasuryDirect login page. If you cannot recover it, contact the Treasury's customer service line. You will need to verify your identity. For paper bonds, a bank can help you determine the value and process the redemption.

Is there ever a reason to hold a bond past 30 years?

No. Once a bond reaches its 30-year maturity date, it stops earning interest entirely. Holding it longer gains you nothing. Redeeming it and reinvesting the proceeds into a new bond or another savings vehicle is the better choice.