Savings bonds are a really old-fashioned form of investing. You can buy savings bonds now and earn a fixed interest rate for a long period of time at little to no risk. A virtually guaranteed return on investment. This is as conservative as it gets when it comes to investing.
If you’re reading this, I’m guessing you’ve probably discovered an old, expired savings bond that you’ve completely forgotten about until now. Or maybe you saw the title of this post and just clicked out of curiosity.
Do you have to cash in savings bonds when they mature?
Whatever your reasons might be for coming here, I’m going to give you the same answer:
When your savings bonds mature, you should always cash them in if you can, but you don’t technically have to. When your savings bonds mature, they don’t pay you any more interest. So there’s no point in letting that money sit there instead of working for you.
Check the maturity date
Bonds should keep giving you interest until it matures. Once it does mature, you should go ahead and redeem it because it won’t give you any more interest.
To figure out the maturity date, you first need to figure out the type of savings bond you have. If it’s electronic, it should be pretty straightforward to find out if you log into your account on Treasury Direct.
If you have a paper savings bond, the tips below can help you out.
Look at the series name on the upper right corner of the bond. Series EE or I bonds mature 30 years after the issue date. Series HH bonds mature 20 years after the issue date. The issue date can be found right under the series name.
If you see series E, H, or anything else as the series name, that bond is definitely matured by now. No one issues those series of bonds anymore and all existing ones already hit their maturity date.
If you want to confirm, you can check Treasury Direct. Doing a quick google search of your bond series will also lead you there.
How much your bond is worth
The value of your bond is equal to the value the bond was bought for plus any interest accumulated over the years.
If it’s a series EE or I bond, you can check its value online on Treasury Direct since it’s an electronic bond. For paper bonds, Treasury Direct has a calculator you can use to find out what your bond is worth.
To check how much interest you gained, you should get an IRS form 1099-INT after you redeem your bond. This form shows the total interest earned the year the bond reached final maturity.
That might be important around tax season when you have to report your interest gains to the IRS (if you didn’t report it the year the bond reached maturity like you should have).
Cash it in
If it’s an electronic bond, just log onto Treasury Direct and follow the instructions.
If it’s a paper bond, check with your local bank to see if they will redeem it for you. You might want to check to see if you need to bring any identification or documents with you. You need to be listed as the owner or co-owner of that bond to redeem it.
Let’s say you don’t have access to a bank that can help you redeem your paper bond. Or you want to practice social distancing. Or maybe you just don’t feel like talking to people. You also have the option of mailing it to the Treasury Department.
To do this, fill out FS Form 1522, have your signature certified, and mail the bond with the form to Treasury Retail Securities Site, PO Box 214, Minneapolis, MN 55480-0214. They’ll direct-deposit the redemption amount into the bank account number listed on the form.
If you’re not listed as the owner or co-owner of your bond because you inherited it from someone who passed away, you will have to fill out the FS Form 5336. If the savings bond in question here is worth over $100,000 (lucky you), it’s going to have to be settled in court unfortunately.
A couple of notes on redeeming your bond if it’s not mature: You can’t cash in your bonds until they are at least a year old. If you’re redeeming your bond before it’s 5 years old, you will lose out on the last 3 months of interest.
Why you should cash in your bonds when they mature
The main reason you would want to cash in your bond when it matures is that it doesn’t earn any more interest. It serves no purpose just sitting there as a savings bond.
Not cashing in your bonds because of taxes is like saying you don’t want a free $1,000 because $100 is going to fees. You’re essentially giving the government a loan for free with 0% interest rate when you don’t cash in your matured bonds. It’s your money, don’t you want it back?
While you might not be losing money, you are certainly missing out on the opportunity to gain money by investing that money elsewhere or to spend it on something nice for yourself.
Why people don’t cash in matured bonds
I’m no spokesperson for all people who own matured bonds that haven’t been cashed in, but I have some guesses as to why people don’t do it.
They got it a long time ago and forgot
I’m guessing the main reason people don’t do it is because they got their savings bond as a gift a long time ago and forgot about it. Maybe a distant relative gave them a savings bond when they were a kid and their parents forgot to remind them when they got older. Or maybe it was part of some company payroll system that got lost in job transitions.
Apparently, there are billions of dollars sitting around as forgotten savings bonds. If the US has about 300 million people, that’s about $10 per person. You can also think about it as 1 in 10 people have a $100 savings bond they completely forgot about somewhere.
If you think you might have a savings bond that someone gave to you a long time ago (or you want to try your luck), you can fill out FS Form 1048 to ask the treasury department to check for you. If they do find one, they can help you reclaim it and cash it in.
They are afraid of taxes
The only other possible reason I can think of (besides being just plain lazy) is they don’t want to deal with the taxes. If a bond’s interest hasn’t been reported every year, all that accumulated interest will become subject to federal income taxes (but not state or local taxes).
That only applies to paper bonds since electronic bonds are automatically redeemed with the interest earned reported to the IRS. Not cashing in an electronic bond doesn’t postpone the taxes.
Maybe that intimidates some people enough to postpone cashing in their savings bond?
Dealing with the interest taxes
If taxes are the reason you aren’t cashing in your matured bonds, I’m recommending you go ahead and cash in your savings bond anyways. It is getting something rather than nothing after all.
There’s also a few tips you can use to minimize the impact of taxes involving using the money for a specific purpose.
Paying for Education Expenses
Note: This only applies to series EE or I bonds issued after 1989.
If you use the interest on qualified higher-education expenses, the interest money can be excluded from your gross income through the education tax exclusion. To apply for exclusion, you have to attach IRS Form 8815 to IRS Form 1040 or 1040-SR and send both to the IRS.
Put the money in a retirement account
If you aren’t a student who has tuition to pay, this is probably the next best use of the money. Honestly, it’s what I would do if I discovered I had a long-lost savings bond.
When you put the savings bond money in a tax-deferred retirement account, you’ll still have to pay interest tax on the bond, but you can deduct that contribution from your taxable income.
Conclusion
Long story short, just cash in your savings bond if it already reached its maturation date. I would much rather have the government give me back my money and put it to work in the stock market instead of letting it sit there losing value to inflation.
To cash in your savings bond, check with your local bank to see if they can help if you have a paper savings bond. If you have an electronic bond, it’s probably handled on Treasury Direct.Treasury Direct is the go-to source to find out the absolute facts straight from the source since it’s run by the US Department of the Treasury. They handle all the treasury securities for individual US investors. If you want more info or want to make a final decision, I would check there.
Fun facts: used to lion dance in college, can speak 3 languages (sort of), can lift 400 lbs, once ate a chicken head.
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