What Should You Do With Your Old Savings Bonds?

U.S. savings bonds have long served as a popular, secure investment vehicle for individuals across the nation. Many people received these bonds as gifts during childhood or purchased them as a straightforward way to save for future goals. Over time, these physical or electronic assets may have matured, ceased earning interest, or reached a point where their owners are ready to access the accumulated value. Understanding the various aspects of these bonds, from their current worth to the redemption process and associated financial considerations, is an important step for anyone holding these long-term savings. This information can help individuals make informed decisions about their older savings bonds.

Understanding Your Savings Bonds

Before taking any action, it is important to first assess the specific characteristics of your savings bonds. The U.S. Treasury has issued several series of savings bonds over the years, including Series EE, I, H, and HH bonds, each with distinct maturity periods and interest earning structures. Series EE bonds, for instance, are guaranteed to double in value in 20 years and continue to earn interest for a total of 30 years from their issue date, while Series I bonds feature an interest rate that adjusts with inflation and also earn interest for up to 30 years. Older Series H and HH bonds, which are no longer sold, also had specific interest payment schedules and maturity terms.

To determine the current value and maturity status of your bonds, locate the issue date printed on your physical paper bond or access it within your TreasuryDirect account for electronic bonds. For paper bonds, the TreasuryDirect website offers a Savings Bond Calculator that requires the bond’s series, denomination, and issue date to provide its current value, interest rate, and final maturity date. This calculator can also show values for past or future dates. Electronic bond values are readily available by logging into your TreasuryDirect account and reviewing your current holdings.

Understanding the maturity date is important because bonds stop accruing interest once they reach their final maturity, typically 20 or 30 years depending on the series. For example, all HH bonds issued in 2004 reached final maturity by August 1, 2024, meaning they no longer earn interest. If a bond has stopped earning interest, redeeming it may be a prudent financial step to redeploy the funds into other investments.

Redeeming Your Savings Bonds

Once you have identified your savings bonds and determined their current value, the next step involves the redemption process. The method for redemption varies slightly depending on whether you hold paper or electronic bonds. Generally, bonds must be held for at least one year from their issue date before they can be redeemed, and an early redemption within the first five years typically results in a forfeiture of the last three months of interest.

For paper savings bonds, you can typically redeem them at most financial institutions, such as banks or credit unions. It is advisable to contact the institution beforehand to confirm their bond redemption services and to inquire about any specific requirements, as some may only cash bonds for their account holders. When redeeming paper bonds in person, you will need to present valid government-issued identification, your Social Security number, and endorse the bond. The funds are usually deposited directly into your bank account.

Alternatively, paper bonds can be redeemed by mail by sending them to the Treasury Retail Securities Services, often accompanied by FS Form 1522. This form requires details such as the bond’s serial number, issue date, and your Social Security number, along with direct deposit information. Electronic savings bonds held in a TreasuryDirect account offer a streamlined online redemption process. You can log into your account, navigate to the “ManageDirect” section, and select the option to redeem securities. Funds from electronic redemptions are typically deposited into your linked bank account within two business days.

Addressing Common Challenges

While redeeming savings bonds is often a straightforward process, certain situations can present unique challenges. If your paper savings bonds are lost, stolen, or destroyed, you can request a replacement or payment by submitting FS Form 1048, “Claim for Lost, Stolen, or Destroyed United States Savings Bonds.” This form requires detailed information about the missing bonds, including issue dates, denominations, and serial numbers if known. If serial numbers are unknown for bonds issued in 1974 or later, the Treasury Hunt tool on TreasuryDirect can assist in locating them, generating a pre-filled FS Form 1048. The completed form must typically be signed in the presence of a notary or a certifying officer at a financial institution.

When the original owner of a savings bond is deceased, the redemption process depends on how the bond was registered and the size of the estate. If a survivor is named as a co-owner or beneficiary on the bond, they can generally redeem it by providing a certified copy of the death certificate along with their identification.

Estates and Trusts

For bonds belonging to an estate that is being formally administered, the legal representative (e.g., executor) may need to submit documents such as letters of appointment and FS Form 1455, “Request by Fiduciary for Distribution of United States Treasury Securities.” For smaller estates not undergoing formal administration, FS Form 5336, “Disposition of Treasury Security Belonging to a Decedent’s Estate Being Settled Without Administration,” may be used.

For bonds registered to a minor, a parent can typically cash them if the child is too young to understand the request, by endorsing the bond with a specific statement and providing the child’s Social Security number. For bonds held in a trust, the trustee will need to provide trust documents and may use forms like FS Form 1455 to facilitate redemption or reissue. These scenarios require careful attention to the specific legal and identification requirements to ensure a successful transaction.

Tax Implications of Redemption

The interest earned on U.S. savings bonds is subject to federal income tax, but it is exempt from state and local income taxes. This means that while you will owe federal taxes on the accumulated interest, you will not pay state or local taxes on that portion of your redemption proceeds. The timing of when this interest is reported for tax purposes offers flexibility. You have the option to defer reporting the interest until the bond matures, is redeemed, or changes ownership. Most individuals choose this deferral option, reporting all accrued interest in the year of redemption.

When you redeem a savings bond, the financial institution or TreasuryDirect will issue a Form 1099-INT, which reports the total interest earned over the bond’s lifetime. This form will be provided for the tax year in which the interest is received. For electronic bonds held in TreasuryDirect, the Form 1099-INT is typically available in your account by January 31 of the following year.

A notable tax planning consideration involves the Education Savings Bond Program, which may allow you to exclude the interest from federal income tax if the proceeds are used for qualified higher education expenses. To qualify for this exclusion, the bonds must be Series EE or I bonds issued after 1989, and the bond owner must have been at least 24 years old when the bond was issued. The exclusion is subject to income limitations based on your modified adjusted gross income (MAGI) and is reported using IRS Form 8815. Qualified expenses include tuition and fees for yourself, your spouse, or your dependents, but generally exclude room and board.