U.S. Savings Bonds: An American Tradition

Many people had their first experience with saving for the future as children when they received a U.S. savings bond as a gift. Savings bonds are issued by the U.S. Treasury Department. However, unlike Treasury bills, notes, and bonds, they are not traded on the open market, and are sold almost exclusively to individuals.

EE bonds

EE bonds issued on or after May 1, 2005 earn a fixed interest rate; the rate for new issues is set every six months. (EE bonds purchased between May 1997 and April 2005 pay a variable interest rate based on average current yields for 5-year Treasury securities.) An EE bond continues to earn interest as long as you hold it (up to 30 years). However, the interest isn’t paid to you until you cash in the bond. An EE bond can be cashed in any time after 1 year, though if you redeem it within the first 5 years, you’ll forfeit the most recent 3 months of interest. There is a $10,000 limit on EE purchases in a single calendar year.

I bonds

Introduced in 1998, I-bonds offer some protection against inflation. Earnings on an I-bond are calculated by combining a fixed rate of return that is set when the bond is issued, and a semi-annual inflation rate that changes twice a year and is based on the Consumer Price Index (CPI). I-bonds are sold at face value, and the interest is paid when the bond is redeemed. As with EE bonds, if you redeem an I-bond within the first 5 years, you’ll lost the most recent 3 months of interest; after 5 years, there is no penalty for redemption. The same annual limits on purchases of EE bonds apply separately to I bonds. In other words, you may purchase a total of $10,000 annually in both EE and I bonds, for an annual total of $20,000 for the two types combined.

Are there other types of savings bonds?

There also are other types of savings bonds, but they can no longer be purchased, though they still pay interest to savers who already own them.

  • E bonds were replaced by EE bonds in 1982 but function in much the same way.
  • HH bonds (and H bonds, their predecessors) pay a fixed interest rate every 6 months for either 20 or 30 years, depending on when the bond was issued. (10 years after the date of issue, the interest rate on an HH or H bond may change to the most recent HH bond interest rate). A maturing HH or H bond can no longer be reinvested into another HH bond.
  • U.S. Individual Retirement Bonds and U.S. Retirement Plan Bonds also are no longer issued but continue to earn interest, which is added to the face value of the bond when it is redeemed. Retirement Plan Bonds can be redeemed once the owner reaches age 59½, and can be rolled over into an existing IRA; they mature 5 years after the owner’s death. Individual Retirement Bonds cease to pay interest after the owner reaches age 70½, or 5 years after the owner dies, whichever is earlier.

What if my bond’s maturity date has already passed?

Once a bond has reached its final maturity date, it no longer pays any interest. You should redeem it at a bank or other financial institution, and use or reinvest the proceeds.

Older bond series — A, B, C, D, F, G, J, K bonds and U.S. Savings Notes (also called Freedom Shares) issued before 1970 — have all passed their final maturity dates and no longer pay any interest. If you or an older relative still has any bonds in these series, they should be redeemed.

How can I buy savings bonds?

Savings bonds may be purchased in electronic form online directly from the Treasury Department at www.treasurydirect.gov. Savings bonds are no longer available in paper form, though existing paper bonds can still be redeemed at financial institutions. Electronic savings bonds can be purchased in $25 increments, up to $10,000 in a single calendar year. You also can exchange paper savings bond certificates for electronic securities.


Chesapeake Financial Advisors is a fee-only financial planning, investment advisory and tax planning firm with offices in Towson and Columbia, Maryland.


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