Although your browser settings don't allow you to view the website survey we're conducting, please e-mail your comments. EE bonds issued from May through April earn a variable rate of interest. Treasury determines the rate each May 1 and November 1 and applies that rate for six-month rate periods that start in the next six months. For six-month rate periods that start from November through April , the annual interest rate that applies to EE bonds with issue dates from May through April is 0.
Regardless of interest rates, these bonds become worth at least twice what you paid for them, if you keep them long enough. See How does the value of my EE bond grow? The rate that applies to a particular EE bond with an issue date from May through April changes every six months from the bond's issue date. For example, for an EE bond with an issue date of September 1, , a rate change announced in May takes effect on the following September 1 and a rate change announced in November takes effect on the following March 1.
EE bonds with issue dates from May through April earn interest from the first day of their first month. The original price of a paper EE bond is half of its face value. The paper EE bond starts to earn interest on what it cost not on its face value. Over time, with compounded interest, the paper EE bond gets closer and closer to its face value. The original price of an electronic EE bond is its face value not half of face value. Electronic bonds start to earn interest right away on the full face value.
Treasury guarantees that an EE bond whether paper bought at half of face value or electronic bought at full face value will be worth at least double its purchase price when the bond reaches original maturity.
Original maturity is a point part way into the bond's year life. If an EE bond has not earned enough interest to be worth an amount that is double its purchase price on the date it reaches original maturity, Treasury will make a one-time adjustment on the original maturity date of the bond to make up the difference. As owner of an EE bond, you pay federal income tax, but not state or local income tax, on the interest the bond earns.
If you use the bond money to pay certain qualifying educational expenses, you may not have to pay federal income tax on the interest. For additional information, see Using EE bonds for Education. The Treasury Department makes an adjustment to the interest earnings if needed.
Pendergast points out that the longer you hold your bond, the more likely you are to benefit from it. If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. In some cases, you might actually be better off cashing them in before maturity, Pendergast points out.
If you can move the money into a more liquid investment vehicle with higher returns, it might make more sense depending on your goals for the money. Series EE bonds issued after accrue interest at a fixed monthly rate, which is compounded semi-annually.
If you have bonds bought prior to that, especially paper bonds, the U. When deciding when to cash in your Series EE savings bonds, wait until after the compounding date.
You can get an idea of when to expect your interest to be added to your bond with this chart:. Whether Series EE Savings bonds make good investments depends on your individual circumstances and goals.
However, 20 years to see only two times your initial investment might not help you meet certain goals. Carefully consider what you plan to use the money for and its place in your portfolio. How We Make Money. Miranda Marquit. Written by. Miranda Marquit is a contributing writer for Bankrate. Miranda writes about topics related to investing, saving and homebuying. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity.
An increase in bond buying can be particularly beneficial for the government in times of a financial crisis. Treasury Department has started issuing a year note for the first time in three decades and boosted the three, 10, and year bond auctions to record amounts.
Savings Bonds Explained When you purchase a U. Think of it like taking out a loan. Since U. But this low-risk also means they provide a low return on interest. While savings bonds used to be issued on little pieces of paper, those days have come to an end. Savings bonds can now be purchased online from TreasuryDirect , the U. Purchasing a savings bond is fairly straightforward.
You will pay half the price of the face value of the bond. Once you have the bond, you choose how long to hold onto it for—anywhere between one and 30 years. The Treasury promises Series EE savings bonds will reach face value in 20 years, whereas the Series I savings bond has no guarantee of value in maturity. Keep in mind both reach full maximum value at 30 years. The interest that compounds over time with a savings bond depends on its series.
The government adjusts bond rates on series EE bonds in May and November each year. For example, a Series EE bond has a fixed interest rate of 0. Both rates are current until they go through their next adjustment November 1st, Savings bonds are considered one of the safest investments you can buy. These values are estimated based on past interest rates. Future interest rates will vary. The cash value will be credited to your bank account within two business days.
Bear in mind, all newly-issued savings bonds are electronic, and paper savings bonds can be converted to electronic bonds.
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