You have to hold a Series I savings bond for five years to cash it in without any penalty. Redeem any earlier and one of two rules applies: during the first 12 months after the issue date the bond cannot be cashed at all, and between year one and year five you forfeit the last three months of interest. At the five-year mark both restrictions disappear and you receive your full principal plus every cent of accrued interest.1TreasuryDirect. I Bonds
The First Year: No Access at All
Federal regulations prohibit redeeming a Series I bond during the first 12 months after its issue date. Under 31 CFR 359.6, bonds issued on or after February 1, 2003 cannot be cashed until a full year has passed.2eCFR. 31 CFR 359.6 – When May I Redeem My Series I Bond TreasuryDirect will not process a redemption request before that anniversary, and no bank will cash a paper bond that hasn’t reached it either. Your money is locked.
One exception exists. If you live in an area covered by an official federal disaster declaration, Treasury waives the one-year holding period and allows early redemption. The waiver also covers paper bonds that were lost or damaged in the disaster.3TreasuryDirect. Cashing Savings Bonds Affected by a Disaster Outside of a declared disaster, there is no path to your funds before the 12-month mark.
Years One Through Five: The Three-Month Interest Penalty
Once your bond is more than a year old you can redeem it at any time, but if fewer than five years have passed since issue, Treasury automatically withholds your last three months of interest. The deduction happens before the proceeds reach your bank account. Cash out at 18 months and you receive 15 months of interest.1TreasuryDirect. I Bonds
The dollar cost of the penalty depends on which three months of interest you give up. I bonds earn a composite rate that combines a fixed rate with a semiannual inflation adjustment, so the rate can change every six months.4TreasuryDirect. I Bonds Interest Rates If those final three months fell during a low-inflation stretch, the penalty is smaller in dollar terms. If they fell during a high-inflation stretch, you forfeit more.
As a rough example, a $10,000 bond earning a 4% composite rate generates about $400 of annual interest. Three months of that is roughly $100, the amount you would lose by redeeming inside the five-year window. The current value shown in your TreasuryDirect account for any bond under five years old already has the three-month deduction baked in, so what you see is what you would actually receive.4TreasuryDirect. I Bonds Interest Rates
Timing Within the Month
I bonds earn interest starting on the first day of the month you buy them, and new interest posts on the first of each later month.4TreasuryDirect. I Bonds Interest Rates Waiting until the end of a month to redeem adds nothing. Whether you cash out on the 2nd or the 30th, the payout is the same, so redeeming early in the month frees up your cash sooner at no cost.
Timing Across Rate Periods
If you know you’ll need to redeem before five years, line up the redemption so the three forfeited months fall in a lower-rate stretch. The composite rate resets every May and November, so you can look at the recent rate periods for your bond and pick the window where the last three months of interest would be smallest. The penalty still applies, but the dollar amount can be meaningfully smaller.
After the Five-Year Mark
On the fifth anniversary of the issue date, the three-month interest penalty disappears. From that point on, you redeem the bond and receive your full principal plus all accrued interest with no deductions.1TreasuryDirect. I Bonds
Reaching five years is not a deadline. The bond keeps earning interest, compounded semiannually, for up to 30 years from its issue date.1TreasuryDirect. I Bonds If you don’t need the cash, there is no reason to redeem at year five. Once the bond hits 30 years it stops earning entirely, and at that point you should cash it in rather than leave the money idle.
How to Cash In Once You’re Ready
Electronic Bonds
Log into your TreasuryDirect account, open the ManageDirect tab, and choose “Redeem securities” under Manage My Securities.5TreasuryDirect. TreasuryDirect Help – How Do I You can redeem the full bond or part of it. For a partial redemption, you must cash at least $25 and leave at least $25 in the bond.6TreasuryDirect. Cashing EE or I Savings Bonds The proceeds reach your linked bank account in about two business days. The following January, TreasuryDirect posts a 1099-INT in your account for the year’s redeemed interest.
Paper Bonds
Treasury stopped selling paper I bonds on January 1, 2025, but any paper bonds you still hold remain redeemable.1TreasuryDirect. I Bonds Most banks and credit unions that handle savings bond redemptions will cash them. Bring a valid government-issued photo ID and sign the back of the bond in front of a bank officer.7Federal Reserve Financial Services. Savings Bond Redemptions Frequently Asked Questions Some banks cap how much they’ll cash for non-customers.
If no local bank will process the redemption, mail the bonds and FS Form 1522 to Treasury Retail Securities Services in Minneapolis. When the total value is $1,000 or less, you can sign the form yourself and enclose a copy of your ID. Above $1,000, your signature must be certified by a notary or an authorized certifying officer at a financial institution.8Bureau of the Fiscal Service. FS Form 1522 – Special Form of Request for Payment of United States Savings and Retirement Securities