How to Use or Cash Out Your Savings Bonds

Once you own a U.S. savings bond, you have three main paths: hold it until maturity and collect the full value, cash it in early if you need the money, or pass it to someone else. Which one makes sense depends on when you bought it, how much you need right now, and what penalties you'll face for leaving early.

The simplest option is to do nothing and let the bond sit. Series EE and Series I bonds keep earning interest for 30 years from the issue date. You don't have to do anything—the Treasury keeps track automatically. When you're ready to use the money, you cash it in. But if you cash in a bond before it's been held for five years, you lose the last three months of interest as a penalty. After five years, you can cash it with no penalty.

If you need the money before five years have passed, you can still cash the bond—you'll just lose those three months of interest. The Treasury will send you the current value minus that penalty. This is different from a bank account; there's no fee to withdraw, just that interest forfeit.

Key Takeaways

  • You can cash in a savings bond at any time after you own it, but you lose three months of interest if you cash it before five years have passed.
  • After five years, you can cash your bond with no penalty and receive the full current value.
  • Bonds continue earning interest for 30 years, so holding them longer means more money when you finally cash in.
  • You can transfer a bond to someone else or name a beneficiary to inherit it if you die.
  • The Treasury Department handles all bond transactions—you don't need a bank or broker.

Cashing In Your Bond at a Bank or the Treasury

To cash in a paper savings bond, take it to a bank. Most banks will cash U.S. savings bonds for their customers at no charge. Bring the bond itself and a valid ID. The teller will verify the bond's current value using Treasury records, deduct any early-withdrawal interest penalty if you've held it less than five years, and give you the cash or deposit it into your account.

If you own a digital bond (purchased through TreasuryDirect, the government's online system), you don't have a physical certificate to take anywhere. Instead, you log into your TreasuryDirect account, select the bond you want to cash, and request a redemption. The Treasury deposits the money into your bank account within a few business days. This is faster than going to a bank and works from your computer or phone.

If your bank won't cash the bond for some reason, you can mail the paper bond directly to the Treasury Department with a form. This takes longer—typically two to four weeks—but it's an option if no local bank will help.

What Happens If You Hold the Bond Past Its Final Maturity

Series EE bonds stop earning interest after 30 years. Series I bonds also stop earning interest after 30 years. Once a bond reaches final maturity, it no longer grows in value, even if you leave it sitting in a drawer. The Treasury stops paying interest on that date.

This doesn't mean the bond becomes worthless or disappears. You can still cash it in for whatever it's worth at that moment. But there's no reason to hold it any longer—you're not earning anything by waiting. If you own a bond that's reached final maturity, cashing it in and putting the money in a savings account or another investment makes more sense, since at least those will continue to earn interest.

You can check when your bond reaches final maturity by looking at the issue date on the bond itself. Count forward 30 years. The Treasury also maintains a database where you can look up your bonds if you own them through TreasuryDirect.

Transferring or Leaving Your Bond to Someone Else

If you own a paper savings bond and want to give it to someone else, you can sign the back and hand it over. The new owner can then cash it in or continue holding it. The bond stays in your name on the Treasury's records, but the person holding the physical certificate can redeem it.

For digital bonds in TreasuryDirect, you cannot transfer ownership directly. However, you can name a beneficiary in your TreasuryDirect account. If you die, that person inherits the bond automatically. They can then log in with their own account or contact the Treasury to take ownership and decide what to do with it.

If you die without naming a beneficiary, your bonds become part of your estate. Your family or executor will need to work with the Treasury to transfer them, which takes longer and may require court involvement depending on your state's laws.

Deciding Whether to Hold or Cash In Early

The main trade-off is between needing money now and earning more money later. A Series I bond bought today earns a fixed rate plus an inflation rate that changes every six months. If you hold it for 30 years, you'll earn significantly more than if you cash it in after one year. But if you need the money and have held the bond for at least five years, there's no penalty—you get the full value.

If you've held the bond for less than five years and cash it in, you lose three months of interest. Calculate whether that penalty is worth it. For example, if a bond is worth $5,000 and you've earned $100 in interest so far, the penalty is roughly $25 (three months of that interest). If you need the $5,000 more than you need that $25, cashing in makes sense.

Series I bonds have an additional consideration: the interest rate resets every six months. If you're holding one for inflation protection, cashing it in right after a rate change might mean missing out on higher earnings. Checking the Treasury's rate announcement schedule can help you time a redemption if you're planning one.

Reporting Savings Bond Interest on Your Taxes

When you cash in a savings bond, you owe federal income tax on the interest you earned, not on the original amount you paid. For example, if you bought a $50 bond for $25 and it's now worth $75, you owe tax on the $50 in interest.

You report this interest in the year you cash the bond. The Treasury doesn't send you a tax form automatically unless you cash in more than $1,500 in bonds in a single calendar year. If you do, you'll receive a Form 1099-INT showing the interest earned. Even if you don't receive a form, you still owe tax on the interest and should report it on your tax return.

Some people choose to report the interest each year as the bond earns it, rather than waiting until they cash it in. This can lower your tax bill in the year you cash the bond. You'd need to file Form 8818 with the IRS to make this election. It's a strategy worth discussing with a tax professional if you own a large bond or plan to hold it for many years.

Frequently Asked Questions

Can I cash in a savings bond before five years without losing money?

No. If you cash in a bond before five years have passed, you lose the last three months of interest as a penalty. After five years, you can cash it with no penalty and receive the full current value.

What if I lost my paper savings bond?

Contact the Treasury Department with the bond's serial number and issue date if you have them. The Treasury can issue a replacement, though the process takes several weeks. If you own bonds through TreasuryDirect, you don't have a physical certificate to lose—they exist only in your online account.

Do I have to cash in all my bonds at once?

No. You can cash in one bond and leave others alone. If you own multiple bonds, you can choose which ones to redeem based on when you need the money and how long each has been held.

What happens to my savings bond if I move to another country?

You can still own and cash U.S. savings bonds if you move abroad. If you own them through TreasuryDirect, you can continue to manage your account online. For paper bonds, you can still cash them at a U.S. bank or mail them to the Treasury. Some countries have tax treaties with the U.S. that affect how the interest is taxed, so check with a tax professional.

Can I use a savings bond as collateral for a loan?

No. U.S. savings bonds cannot be pledged as collateral. They're non-transferable in the legal sense—you can't use them to secure a debt. You'd have to cash them in first if you needed money to borrow against.