A U.S. savings bond cannot lose value in dollar terms: the Treasury guarantees you will always get back at least what you paid, plus any interest already credited. But that guarantee only covers the number on your statement. Inflation, a three-month interest penalty for cashing early, and holding a bond past its final maturity can each reduce what those dollars are actually worth.
Your Principal Is Protected
Every savings bond is backed by the full faith and credit of the U.S. government, so the Treasury stands behind your principal no matter what happens in financial markets.1TreasuryDirect. Savings Bonds: About Interest on both Series EE and Series I bonds compounds semiannually, and each period’s interest is added to a new, higher principal that carries into the next period.2TreasuryDirect. EE Bonds
For Series I bonds, the Treasury explicitly blocks the composite rate from going below zero. Deflation can pull the combined rate under the fixed rate, but if inflation turns negative enough to push the composite into negative territory, the rate stops at zero rather than shrinking your balance.3TreasuryDirect. I Bonds Interest Rates Series EE bonds earn a fixed rate that does not change for at least 20 years, so there is no inflation component to fluctuate downward. Either way, the balance shown today will not be smaller tomorrow.
Cashing In Before Five Years Costs You Three Months of Interest
Both Series EE and Series I bonds carry a 12-month lockup. You cannot cash them at all during the first year after purchase.4TreasuryDirect. Cashing EE or I Savings Bonds The one exception is for owners in areas hit by a federally declared disaster, who can request early redemption by contacting the Treasury or submitting a certified form.5TreasuryDirect. Affected by a Disaster
After year one but before year five, you can redeem, but the Treasury deducts three months of interest. Cash a bond nine months after issue and you receive the value as if you had held it only six.6eCFR. 31 CFR 359.7 – Series I Savings Bond Early Redemption Interest Penalty The penalty cannot push you below your purchase price, so you keep your principal. You just walk away with less growth than the account showed. Past the five-year mark, the penalty disappears and you redeem at full accumulated value.
Inflation Is the Real Threat to Value
This is the risk most bondholders underestimate. The balance never drops, but the groceries, rent, and gas that balance can buy may cost more by the time you cash in. The gap between what your dollars are worth on paper and what they can actually purchase is where real value slips away.
Series EE bonds are especially exposed because they lock in a fixed rate for the life of the bond. At the current rate of 2.50% for bonds issued November 2025 through April 2026, an EE bond earning that rate while inflation runs at 4% is falling behind in real terms every month.2TreasuryDirect. EE Bonds The statement keeps climbing. Purchasing power quietly shrinks.
How Series I Bonds Push Back
Series I bonds were built to address exactly this problem. They pay a composite rate made of two pieces: a fixed rate that stays the same for the life of the bond, and a semiannual inflation adjustment tied to the Consumer Price Index for All Urban Consumers (CPI-U). The Treasury recalculates the inflation component every May and November. The formula combines the pieces this way: fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate). For bonds issued November 2025 through April 2026, the fixed rate is 0.90% and the semiannual inflation rate is 1.56%, producing a composite rate of 4.03%.3TreasuryDirect. I Bonds Interest Rates
There is a catch. When the fixed component is at or near zero, the bond only matches inflation and delivers no real return above cost-of-living increases. You preserve purchasing power without growing it.
After 30 Years, the Bond Stops Earning
Both Series EE and Series I bonds reach final maturity 30 years after their issue date, and interest stops accruing on that day.7eCFR. 31 CFR Part 351 Subpart B – Maturities, Redemption Values, and Investment Yields of Series EE Savings Bonds8eCFR. 31 CFR Part 359 – Offering of United States Savings Bonds, Series I Every day past that date, inflation keeps eating into what the frozen balance can buy. The bond is not losing value in nominal terms, but the money sitting inside it is.
This is a larger problem than most people realize. As of January 2026, roughly 101 million matured unredeemed savings bonds were still sitting uncashed.9U.S. Treasury Fiscal Data. Treasury Savings Bonds Explained Many belong to people who forgot about them or to heirs who never knew they existed. A $1,600 bond that sits ten years past maturity still reads $1,600, but the goods it could once buy cost more now. That is real value lost even though the Treasury’s obligation to pay $1,600 never changes.
There is a tax consequence too. Federal income tax on all accumulated interest comes due in the year a bond reaches final maturity, whether you redeem it or not. Holding a matured bond does not defer the tax bill.
Rising Market Interest Rates Do Not Hurt Your Balance
Savings bonds are non-marketable securities. You cannot sell them to another investor; the only buyer is the U.S. Treasury.9U.S. Treasury Fiscal Data. Treasury Savings Bonds Explained That separates them from marketable Treasury notes and bond funds, whose prices move daily with interest rates. When rates rise, the resale value of older marketable bonds falls because new issues offer better yields.
Savings bonds sit outside that dynamic. Your redemption value is calculated by formula, not by what someone in the market would pay. A rise in national interest rates cannot cause a savings bond balance to decline. If you have ever watched a bond fund show a loss on a brokerage statement during a rate-hiking cycle, that outcome cannot happen with a savings bond. The trade-off is that you also cannot sell one at a premium when rates fall.
The EE Doubling Guarantee Is Worth Protecting
Series EE bonds come with an unusual backstop. The Treasury guarantees that every EE bond will be worth twice its purchase price at the 20-year mark, even if the fixed rate alone would not get it there. If accumulated interest falls short of doubling, the Treasury adds a one-time adjustment to close the gap.2TreasuryDirect. EE Bonds
At a stated rate of 2.50%, compounding alone would not double an EE bond in 20 years, so this guarantee effectively creates a minimum annual return of roughly 3.5% for holders who reach that anniversary. Cash out before year 20, though, and the guarantee is gone. You receive only what the fixed rate has actually earned, minus the three-month penalty if you are still inside the five-year window. For an EE bondholder, the way to lose value in a way that matters is to redeem just before that 20-year adjustment lands.