The best time to cash in savings bonds is at the start of a month, after the five-year mark when the early-redemption penalty disappears, and no later than the 30-year anniversary when the bond stops earning interest altogether. For Series EE bonds, one date matters more than any other: the 20-year anniversary, when the Treasury guarantees the bond will have doubled in value. Cash a day too early in the month, a year too early in the term, or a decade too late after maturity, and you leave money on the table.
The First Year and the Five-Year Penalty
You cannot redeem a Series EE or Series I bond at all during the first 12 months after its issue date.1eCFR. 31 CFR 353.35 – Payment (Redemption)2eCFR. 31 CFR Part 359 – Offering of United States Savings Bonds, Series I After the first year but before five years have passed, redeeming costs you the last three months of interest. A bond cashed at 18 months pays only the interest earned through month 15.3eCFR. 31 CFR Part 351 – Offering of United States Savings Bonds, Series EE The same penalty applies to Series I bonds redeemed before five years, and the redemption value will never fall below what you paid.
Once a bond crosses its fifth anniversary, the penalty is gone for good. If you don’t urgently need the cash and you’re anywhere close to that anniversary, wait. Cashing a bond at four years and 11 months costs you three months of earnings that a single month of patience would preserve.
The 20-Year Mark for EE Bonds
This is the single biggest timing decision most bondholders face. The Treasury guarantees that every EE bond purchased since May 2005 will double in value at the 20-year mark, even if the bond’s fixed interest rate wouldn’t get it there on its own.4TreasuryDirect. EE Bonds Buy a $5,000 EE bond and it will be worth at least $10,000 after 20 years. If the stated interest rate falls short of doubling the bond, the Treasury adds a one-time adjustment at the anniversary to make up the difference.
EE bonds issued from November 2025 through April 2026 earn a fixed rate of 2.50%.4TreasuryDirect. EE Bonds At that rate, ordinary compounding wouldn’t double the bond in 20 years, so the guarantee effectively lifts the annualized return to roughly 3.5% for anyone who holds all the way through. Cash out at year 19 and you get the 2.50% rate with no adjustment. That’s why the 20-year anniversary is the pivotal hold-or-sell date for EE bondholders. After year 20, the Treasury may change the rate or how interest is calculated, so evaluate whether to keep holding or redeem at that point.
The 30-Year Cutoff
Both Series EE and Series I bonds stop earning interest 30 years after the issue date.5eCFR. 31 CFR 351.5 – What Is the Maturity Period of a Series EE Savings Bond After that date, the bond sits at the same value while inflation eats its purchasing power. There is no bonus for waiting and no penalty for redeeming.
The Treasury does not notify you when a bond matures. If you own paper bonds from the 1990s or earlier, check the issue dates. You can look up any bond’s current value and final maturity date using the Savings Bond Calculator at TreasuryDirect.gov by entering the bond series, denomination, and issue date. Anything that has already reached 30 years should be cashed and redirected into something that earns a return.
Cash at the Start of the Month
Savings bonds do not earn interest daily. Interest accrues on the first day of each month and is added to the bond’s value at the start of the following month.6eCFR. 31 CFR 359.16 – When Does Interest Accrue on Series I Savings Bonds A bond cashed on June 30 is worth exactly what it was worth on June 2. Wait one more day until July 1 and you capture the full month of June’s interest.
The rule of thumb is simple. Redeem in the first few business days of a month, never at the end of one. Cashing a bond a day before the month rolls over throws away up to 30 days of earnings for no reason.
Timing Redemptions for Taxes
Savings bond interest is subject to federal income tax but exempt from state and local income tax.7TreasuryDirect. Tax Information for EE and I Bonds Most owners defer reporting the interest until they cash the bond or it reaches final maturity, which is the default method under the tax code.8Office of the Law Revision Counsel. 26 USC 454 – Obligations Issued at Discount You can elect to report the accruing interest each year instead, but that election applies to all your savings bonds going forward and is difficult to reverse.
When you’re deferring, the year you redeem matters. Cashing a large bond in a high-income year can push all the accumulated interest into a higher bracket. Where the choice exists, redeem in years when your income is lower: a gap between jobs, early retirement, or a year with significant deductions.
The Education Exclusion
Bond interest can be excluded from federal income tax entirely if you use the proceeds to pay qualified higher education expenses like tuition and fees. Three requirements trip people up. The bond must have been issued to someone who was at least 24 years old before the issue date. You must be the bond owner, or a co-owner with your spouse; bonds registered in a child’s name don’t qualify. And there is an income cap: for the 2025 tax year, the exclusion begins phasing out at a modified adjusted gross income of $99,500 for single filers and $149,250 for joint filers, disappearing completely at $114,500 and $179,250 respectively.9Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 The income thresholds adjust each year for inflation; the age and ownership rules are set by statute and don’t change.10Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees
If you plan to use bonds for a child’s college costs, buy them in your own name, confirm your income will fall within the limits in the redemption year, and cash the bonds in the same calendar year you pay the tuition.
Partial Redemption as a Timing Tool
Bonds held electronically in TreasuryDirect can be redeemed in part rather than all at once. You can cash a portion and leave the rest earning interest, as long as at least $25 remains in the bond.11TreasuryDirect. Converting EE or I Paper Bonds to Electronic Bonds Paper bonds have to be cashed in full.
Partial redemption is useful when you need cash before the five-year mark: pull out only what you need and limit how much of the three-month penalty applies. It also spreads taxable interest across multiple years, which can keep you in a lower bracket than cashing everything in one shot.
Timing After a Bond Owner Dies
When a bond owner dies, the timing of redemption interacts with estate and tax rules. If the bond names a beneficiary, that person becomes the sole owner upon proof of death and can redeem or reissue.12eCFR. 31 CFR Part 315 Subpart L – Deceased Owner, Coowner or Beneficiary A surviving co-owner is treated the same way. Bonds registered to a single owner with no beneficiary become part of the estate.
For estates where the total Treasury securities value is $100,000 or less, a voluntary representative (typically the surviving spouse) can redeem or distribute without formal estate administration. Above $100,000, the Treasury requires a formally appointed legal representative whose letters of appointment are dated within one year of submission.12eCFR. 31 CFR Part 315 Subpart L – Deceased Owner, Coowner or Beneficiary
Taxes are the timing catch. For electronic bonds reissued through TreasuryDirect, the Treasury reports all interest earned up to the reissuance date on a 1099-INT in the deceased owner’s name and Social Security number, which goes on the decedent’s final income tax return. The new owner later gets a 1099-INT covering only the interest earned after reissuance.7TreasuryDirect. Tax Information for EE and I Bonds Paper bonds are harder. When someone eventually cashes the bond, the 1099-INT covers all interest earned over the bond’s entire life. If some of that interest was already reported on the deceased owner’s final return, the person cashing the bond has to document that to the IRS to avoid being taxed twice. IRS Publication 550 explains how to make that adjustment.