Savings bonds have been a popular investment in the United States since 1935. Although there are many types of savings bonds, Series EE savings bonds may be the most well-known.
What are the types of Series EE savings bonds?
There are two types of Series EE savings bonds: paper bonds and electronic bonds. These bonds operate in slightly different ways from each other.
Electronic Series EE Bonds
Electronic bonds are sold at their face value. If you wish to invest $50, you will receive an electronic bond worth $50. It is worth the full value when it is eligible for redemption.
Electronic bonds can be purchased in amounts starting from $25 or more, in penny increments. If you have $547.32 you’d like to invest, you can do so. This makes these bonds a great option for small investors with limited funds.
Purchases of electronic bonds are limited to no more than $10,000 in a fiscal year. They are issued to a specific account. You will not receive a physical paper bond when you purchase them.
Paper Series EE Bonds
Starting January 1, 2012, paper Series EE savings bonds are no longer sold. Previously, they were sold at half their face value. This means that if you bought a bond with a face value of $5,000, you may have paid $2,500 cash.
Paper bonds were sold in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. There was a maximum purchase limit of $5,000 (face value of $10,000) in a fiscal year.
If you have paper bonds, you can convert them to electronic bonds.
How do you earn money from Series EE savings bonds?
When you purchase Series EE savings bonds, you are lending money to the U.S. government. From time to time, the government changes the rules for savings bonds. This means that how they work depends on when you buy them. According to the Treasury Department, Series EE savings bonds purchased on or after May 1, 2005, are fixed-interest bonds. Those purchased during the previous eight years had variable interest rates.
Variable rates can be good in times of inflation. But they can be bad during stable economic growth and low-interest rates.
Series EE savings bonds are considered a type of zero-coupon bond. You will not receive interest income from them. Instead, the bonds are issued at a significant discount from their face value. They then accumulate until they reach the value of the bond at maturity.
The Treasury guarantees this. If an EE bond does not double in value by its maturity date after 20 years, the Treasury will make a one-time adjustment to make up the difference. This guarantee is one of the main differences between Series EE savings bonds and Series I. Series I bonds do not have this guarantee. They come with a fixed rate for the bond’s duration. They also have a semiannual rate that adjusts with inflation.
What are the maturity dates of Series EE savings bonds?
The unique thing about Series EE savings bonds is that the maturity date for paper bonds varies. When they mature depends on the bond’s issue date.
| Bond Issue Date Range | Original Term | Matures After… |
|---|---|---|
| January 1980 – October 1980 | 11 years | – |
| November 1980 – April 1982 | 9 years | – |
| May 1982 – October 1982 | 8 years | – |
| November 1982 – October 1986 | 10 years | – |
| November 1986 – February 1993 | 12 years | – |
| March 1993 – April 1995 | 18 years | – |
| May 1995 – April 1997 | 17 years | – |
| May 1997 – April 2005 | 30 years | – |
| May 2005 – Present | 30 years | – |
In other words, if you purchased a Series EE savings bond in January 1983, it would have matured after 10 years. If you paid $2,500 to buy it, it would be worth $5,000 by January 1993. You will not receive any actual money in the mail. Instead, the value of the interest you were due will be added to your bond each year. This is how its value increases.
You have
The option to hold the bond for up to an additional 20 years. This means it could be worth significantly more than its nominal value.
Are there penalties for cashing out early?
If you sell your Series EE savings bonds to the government within five years of holding them, you will forfeit the interest you were entitled to for the past three months. If you redeem the bonds after five years, there is no penalty. You will receive the full value of the interest you were owed on the bonds.
Who can invest in Series EE savings bonds?
According to the Treasury Department, there are certain requirements for Series EE savings bonds. Individuals, including children under 18, must have their own Social Security number and meet any of the following criteria:
- An American citizen, whether living in the United States or abroad
- A resident of the United States
- A U.S. civilian employee, regardless of their residence
Trusts, estates, corporations, partnerships, and other entities must have either a Social Security number or an Employer Identification Number (EIN).
Series EE savings bonds are owned by those who are registered for them (whether individuals or entities). The registration must reflect the name of the owner, the owner’s Social Security number or EIN, and, if applicable, the second owner or beneficiary.
Source: https://www.thebalancemoney.com/intro-to-series-ee-savings-bonds-357465
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