The right time depends on your bond type, your interest rate, and whether you need the money now or later

You can cash in a US savings bond at any time after you own it for one year. Before that year is up, you cannot redeem it at all. After one year, you can redeem it whenever you choose — but you will lose the last three months of interest if you cash it in before it reaches five years old. After five years, you keep all the interest earned. The longer you hold a bond, the more interest it accumulates, so the decision comes down to whether you need the money sooner or whether letting it sit will give you more than you need right now.

Key Takeaways

  • Series EE and Series I bonds cannot be cashed before one year of ownership, and cashing before five years costs you the last three months of interest.
  • Series I bonds protect you from inflation by adjusting their interest rate every six months, making them useful when prices are rising fast.
  • Series EE bonds earn a fixed rate for 30 years, so they are worth holding longer if interest rates are low elsewhere.
  • You can redeem bonds at most banks, through the Treasury Department's TreasuryDirect website, or through a financial institution where you have an account.
  • Cashing in bonds counts as income on your tax return for the year you redeem them, so plan ahead if you are close to a tax bracket edge.

How the one-year and five-year rules work

The one-year holding period is a hard lock. You cannot touch your money before 12 months pass from the purchase date, even if you have an emergency. This applies to both Series EE and Series I bonds. After one year, you own the bond outright and can redeem it whenever you want.

The five-year interest penalty is softer but still real. If you redeem a bond before it has been five years old, the Treasury takes back the last three months of interest you earned. So if you bought a bond on January 15, 2023, and cashed it on January 14, 2025 (just over two years), you would lose all interest from October 15, 2024 onward. You would get your principal back plus interest only through July 15, 2024. After five years have passed, you keep every penny of interest, no matter when you redeem.

This penalty structure means the bond is truly "locked in" for five years if you want to keep all your earnings. Between years one and five, you have access to your money but at a cost.

When Series I bonds make sense to hold longer

Series I bonds are designed to rise with inflation. The interest rate resets every six months based on the Consumer Price Index. When inflation is high, Series I bonds earn much more than savings accounts or short-term CDs. When inflation drops, so does the rate — but it never goes below zero.

Hold a Series I bond longer if inflation is currently high and you expect it to stay elevated, or if you have no immediate need for the money. The rate you earn in the first six months is locked in for that period, but the next six-month rate depends on inflation at that time. If you redeem early, you lose the chance to earn whatever the next rate will be.

If inflation has already fallen and Series I rates have dropped to match or fall below what you can earn in a high-yield savings account, cashing in after five years makes more sense. You keep your interest and can move the money somewhere more useful.

When Series EE bonds are worth keeping

Series EE bonds earn a fixed interest rate for the entire 30-year life of the bond. That rate was set when you bought the bond and never changes. If you bought an EE bond when rates were higher, holding it longer locks in that better rate for decades.

Compare the rate on your EE bond to what you can earn today in a savings account, money market account, or CD. If your EE bond rate is higher, keep it. If current rates elsewhere are much better, redeem after five years and move the money. Series EE bonds also have a special feature: if the bond has not doubled in value by 20 years, the Treasury will make up the difference. This may provide only applies if you hold the bond for the full 20 years, so bonds bought at lower rates may be worth keeping for that reason alone.

Tax consequences of cashing in

When you redeem a savings bond, the interest you earned counts as income on your federal tax return for that year. You will receive a Form 1099-INT from the Treasury or your bank showing the interest amount. You owe federal income tax on that interest, though not state or local tax.

If you earned a large amount of interest in one year — say you cashed in several old bonds at once — that income could push you into a higher tax bracket. You might also lose tax deductions or credits that phase out at higher income levels. If you are close to an income threshold that matters to you, consider spreading redemptions across two tax years instead of doing them all at once.

You can also choose to report the interest each year as you hold the bond, rather than all at once when you redeem. This requires filing Form 8818 with your tax return. Most people do not do this, but it is an option if you want to spread the tax hit.

Where and how to redeem your bonds

You have three main routes to cash in a savings bond. The easiest for most people is TreasuryDirect, the Treasury Department's website at treasurydirect.gov. If you own the bond through a TreasuryDirect account, you can redeem it online and have the money deposited to your bank account within a few business days. You do not need to mail anything or visit a bank.

If your bond is a paper bond or you do not have a TreasuryDirect account, you can redeem it at most banks and credit unions. Bring the physical bond certificate and a form of ID. The bank will verify the bond, process the redemption, and deposit the money into your account. Some banks charge a small fee for this service; ask before you hand over the bond.

You can also mail a paper bond to the Treasury Department's Bureau of the Fiscal Service with a completed Form PD 1522 (for Series EE bonds) or Form PD 1523 (for Series I bonds). Include a copy of your ID and a letter requesting redemption. Mail it to the address on the form. This route takes longer — typically two to four weeks — but works if you cannot visit a bank or access TreasuryDirect.

Deciding between cashing in and holding

Ask yourself three questions: Do I need this money now? Is the interest rate on this bond better than what I can earn elsewhere? How much will I owe in taxes if I redeem this year?

If you need the money and the bond has been held for at least five years, redeem it. You keep all your interest and can use the cash. If you need the money but the bond is between one and five years old, redeem it anyway — the three-month interest penalty is usually smaller than the cost of borrowing money elsewhere.

If you do not need the money, compare the bond's rate to current savings account rates, CD rates, and money market rates. If your bond earns more, hold it. If current rates are significantly higher, redeem after five years and move the money to earn more. The difference between a 1 percent bond and a 4.5 percent savings account adds up quickly over time.

Frequently Asked Questions

Can I cash in a savings bond before one year?

No. Both Series EE and Series I bonds have a one-year holding period. You cannot redeem them before 12 months have passed from the purchase date, even in an emergency. After one year, you can redeem at any time.

What happens if I cash in my bond at year three?

You get your principal back plus all interest earned through three years ago, minus three months of interest. So if you bought the bond on January 1, 2022, and cashed it on January 1, 2025, you would receive interest only through October 1, 2024. The interest from October 1 through December 31, 2024, is forfeited.

Do I have to pay taxes when I redeem?

Yes. The interest you earned is taxable income in the year you redeem the bond. You will receive a Form 1099-INT showing the amount. You owe federal income tax but not state or local tax on savings bond interest.

Is it better to hold Series I bonds or Series EE bonds longer?

Series I bonds are better to hold when inflation is high, because their rate adjusts every six months. Series EE bonds are better to hold when you bought them at a high fixed rate that is now hard to find elsewhere. Compare each bond's rate to current market rates to decide.

Can I redeem a bond online?

Yes, if you own it through TreasuryDirect. Log into your account at treasurydirect.gov, select the bond, and request redemption. The money deposits to your bank account within a few business days. Paper bonds must be redeemed at a bank or by mail to the Treasury.