A comprehensive how-to for cashing your savings bond
However, how is a savings bond cashed? What happens if you have to cash out a savings bond before it matures? Depending on the kind of bond you own, how you would want to be paid, and how much the bond or bonds are worth, there are different procedures for cashing in savings bonds.
Savings bonds: what are they?
To meet the US government's borrowing needs, debt instruments, sometimes referred to as savings bonds, are offered for sale through the US Department of the Treasury. You are lending money to the government when you purchase a savings bond. You get paid the bond's purchase price plus interest when you cash the savings bond later.
The US government currently offers the following two varieties of electronic savings bonds for purchase online:
- US Savings Bonds, Series EE: These bonds are guaranteed to double in value and carry a set interest rate for the first 20 years.
- US Savings Bonds, Series I: The interest rate on Series I bonds is subject to vary every six months in response to inflation.
Each year, one-cent increments of $25 to $5,000 can be used to purchase electronic savings bonds. For instance, you may spend $307.11 or $25.01 on a savings bond.
Purchasing paper savings bonds requires you to store the bonds securely. You can buy any amount up to $5,000 in $50 increments by using your tax refund as the only form of payment for Series I paper savings bonds.
To complete your order, several bonds might be sent to you. The following denominations are the only ones offered in Series I:
- $50
- $100
- $200
- $500
- $1,000
- Sign up
When is it appropriate to redeem a savings bond?
Series I savings bonds and Series EE bonds have a 30-year maximum holding period after which they will have reached their full maturity date and will no longer be eligible for payment. Before you can cash in a savings bond, you have to keep it for a minimum of one year. However, you are free to cash in a bond at any point in between. Thus, how can you determine when to sell your savings bonds?
One thing to keep in mind is that you will forfeit the last three months of interest if you redeem your savings bonds before the five-year mark. This might be sufficient motivation for certain investors to hang onto bonds for at least five years.
Here are a few justifications for using your funds.
One thing to keep in mind is that you will forfeit the last three months of interest if you redeem your savings bonds before the five-year mark. This might be sufficient motivation for certain investors to hang onto bonds for at least five years.
Here are a few justifications for using your funds.
You must settle your bill.
While earning interest is nice, paying off debt can ultimately save you more money if you're drowning in it.
Whether it's interest charges, unpaid fees, or just a large amount you need to pay off, debt can get costly. One strategy to reduce or eliminate debt is to use your savings bond.
Whether it's interest charges, unpaid fees, or just a large amount you need to pay off, debt can get costly. One strategy to reduce or eliminate debt is to use your savings bond.
You must make a significant buy.
It might be worthwhile to cash in a savings bond in order to obtain funds if you're preparing to make a big purchase, such as a home, car, or other asset.
You're looking for greater yields.
Although savings bonds are extremely safe investments, the interest rate you could receive on them might not be as high as that of high-yield savings accounts or certificates of deposit (CDs), or an S&P 500 index fund. As a result, you can choose to cash in your savings bonds and use the money for other purposes.
The bond matured.
This one is easy. It's time to cash in your savings bond when it reaches its ultimate maturity date. Savings bonds have a 30-year interest-only period.
Verifying the date of maturity
When your bond is due back to you as the investor is known as the maturity date. Make sure your savings bond is eligible for payment by checking its maturity date before cashing it in. The final maturity date of both Series EE and Series I savings bonds is thirty years from the bond's purchase date.
As soon as a year after your first purchase, you can cash in your savings bond. You will forfeit the interest for the final three months if you cash the savings bond within five years of the bond's issue date. The US Treasury determines the maturity dates of savings bonds.
To ascertain your paper Series EE or Series I bond's maturity date:
As soon as a year after your first purchase, you can cash in your savings bond. You will forfeit the interest for the final three months if you cash the savings bond within five years of the bond's issue date. The US Treasury determines the maturity dates of savings bonds.
To ascertain your paper Series EE or Series I bond's maturity date:
- Check the upper right corner of your paper savings bond to find the issue date
- Your bond’s final maturity date will be 30 years from the issue date
To find the maturity date of your electronic Series EE or Series I bonds:
- Log into your TreasuryDirect account
- Click the Current Holdings tab
- You’ll find a list of details about your savings bond, including its maturity date
assemble the necessary paperwork
Whether you're cashing in an electronic or paper savings bond will determine what paperwork you need to bring with you.
There is no need for extra paperwork when cashing in an electronic bond because everything can be done through your TreasuryDirect account.
A copy of your driver's license, passport, state ID, or military ID, along with FS Form 1522, are required if you're cashing in a paper savings bond worth $1,000 or less. A notary public or certifying officer must certify your signature if the bond amount exceeds $1,000.
There is no need for extra paperwork when cashing in an electronic bond because everything can be done through your TreasuryDirect account.
A copy of your driver's license, passport, state ID, or military ID, along with FS Form 1522, are required if you're cashing in a paper savings bond worth $1,000 or less. A notary public or certifying officer must certify your signature if the bond amount exceeds $1,000.
Where do I cash my savings bond?
Whether you have an electronic or paper savings bond will also determine where to cash them in. Cashing electronic savings bonds may only be done online through your TreasuryDirect account. If you own paper savings bonds, you can mail them to Treasury Retail Securities Services (the address is on FS Form 1522) together with the relevant form if you want to cash the bonds.
In addition, your bank or credit union might be able to cash your paper savings bonds. Before you go, give your financial institution a call to find out if it cashes savings bonds, how much it would cash at once, and what identification or other documents you will need.
In addition, your bank or credit union might be able to cash your paper savings bonds. Before you go, give your financial institution a call to find out if it cashes savings bonds, how much it would cash at once, and what identification or other documents you will need.
Finishing the redemption procedure
How to redeem your E-Savers bonds
You have the option to cash part or all of a single electronic savings bond when you redeem it. Bonds that are redeemed in bulk at one time must be fully redeemed and deposited at the same financial institution. Take these actions:
- Open your TreasuryDirect account and log in.
- Select the ManageDirect option.
- Click "Redeem Securities" after seeing the "Manage My Securities" section.
- Choose the kind of security you want to get back.
- Click "Submit" after selecting up to 50 bonds to be redeemed. If you decide on a single bond, you can decide whether to redeem it in full or in part. But you have to take out at least $25 and leave at least $25 on the bond.
- Decide where the money will end up.
- To see the specifics of the transaction, click "Review."
- Tap "Submit" to complete the purchase.
- Within two business days of your approval, your bond(s) will be redeemed and put into your savings or checking account.
How paper savings bonds are cashed in
Your paper savings bond cannot be partially redeemed, unlike an electronic savings bond, therefore you must cash it in full. The savings bonds can be cashed at your neighborhood bank or credit union or mailed in for redemption.
To submit your savings bonds via mail, complete these steps:
To submit your savings bonds via mail, complete these steps:
- The TreasuryDirect website offers three parts that contain FS Form 1522.
- Enumerate every person or organization mentioned on the bonds in Section 1. Put each bond's serial number and issue date on a list that you wish to redeem.
- List the EIN or Social Security number that is being utilized for the redemption in Section 2. Input the account number and routing information for the bank where you want the bonds deposited.
- Section 3: You simply need to sign the form, supply your contact details, and enclose a copy of your driver's license, passport, state ID, or military ID if the amount of bonds being redeemed is $1,000 or less. Should the redemption amount exceed $1,000, you will need to sign the document in front of
Determining the value of your savings bond
To find out the value of your savings bond, log into your TreasuryDirect account. Important information is displayed in your account details, including the amount you deposited, your interest rate, the bond's maturity date, and its current value.
The TreasuryDirect calculator is another tool you can use to determine the value of your paper savings bond. Important information that you'll need to know is the kind of bond you have, the amount you invested, the serial number of the bond, and the date of issue. You must sign into your TreasuryDirect account to determine the value of your electronic savings bonds, as this calculator is solely for paper bonds.
The TreasuryDirect calculator is another tool you can use to determine the value of your paper savings bond. Important information that you'll need to know is the kind of bond you have, the amount you invested, the serial number of the bond, and the date of issue. You must sign into your TreasuryDirect account to determine the value of your electronic savings bonds, as this calculator is solely for paper bonds.
Choices for being paid
bonds for electronic savings
Either the entire amount or a portion of it may be redeemed when cashing in electronic savings bonds. You have to redeem a minimum of $25 and leave a minimum of $25 on the bond if you select a partial amount. You have the option to have the money deposited into your Zero-Percent Certificate of Indebtedness or into a bank account that is linked to TreasuryDirect.
Savings bonds printed on paper
You have to cash the entire bond when cashing in paper savings bonds. The money will be placed into the checking or savings account you specified on the redemption form if you mail in the bond for redemption. You can get the cash value of each savings bond if you take them to a bank. Banks, however, can have a cap on the amount they will cash at once.
Tax implications when redeeming savings bonds
It's crucial to understand the tax implications in addition to how to redeem savings bonds.
Savings bond interest is taxable at the federal level, but not at the state or municipal level, according to Dr. Lei Han, CPA, an associate professor of accounting at Niagara University. Bond owners are in charge of paying interest taxes. Owners have the option of reporting interest income annually or including the interest on their tax return for the year of redemption or maturity. Certain savings bonds may exclude taxpayers from paying interest taxes if they are used to cover eligible educational costs.
Upon cashing in your savings bonds through your TreasuryDirect account or at a bank, you will be issued a 1099-INT documenting the interest that you invested.
Savings bond interest is taxable at the federal level, but not at the state or municipal level, according to Dr. Lei Han, CPA, an associate professor of accounting at Niagara University. Bond owners are in charge of paying interest taxes. Owners have the option of reporting interest income annually or including the interest on their tax return for the year of redemption or maturity. Certain savings bonds may exclude taxpayers from paying interest taxes if they are used to cover eligible educational costs.
Upon cashing in your savings bonds through your TreasuryDirect account or at a bank, you will be issued a 1099-INT documenting the interest that you invested.
Frequently requested inquiries (FAQs)
How can I find out how much my savings bond is worth?
You can check the value of your electronic savings bond by visiting your TreasuryDirect account online if you own one. Use the savings calculator provided by the US Department of Treasury if you own paper savings bonds. The series, denomination, issue month, and issue year must all be entered.
Can I take money out of a savings bond before it matures?
If a savings bond has been issued and it has been at least a year since then, you can cash it before the bond matures. You will forfeit the interest earned for the preceding three months, though, if you cash the bond before the five-year period.
Does cashing a savings bond require the signature of a co-owner?
Paper savings bonds can be cashed by each co-owner independently of the other without the other's signature. In order for the secondary owner of an electronic savings bond to cash the bond, the primary owner must have given the secondary owner view and transaction privileges.
Can I go to any bank and cash a savings bond?
No, not all banks will accept savings bonds for cash. Furthermore, you will need to have an account with certain banks. Make sure you are aware of all the regulations pertaining to cashing savings bonds by contacting the banking institution in advance.
Can I cash the savings bond of someone else?
Generally speaking, only savings bonds that you own or co-own can be cashed. On the other hand, if you possess legitimate legal proof or supporting documentation proving your eligibility to cash the bond, you can cash someone else's savings bond.
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