There are three classes of savings bonds which are EE/E Savings Bonds, I Savings Bonds and HH/H Savings Bonds. Each category of savings bonds has slightly different requirements for redemption. The bond series typically designates the period of time during which the bonds were issued and also how long the bonds continue to earn interest.
Bond Series
Series E Bonds are no longer earning interest. This series of savings bond was replaced by Series EE which earns a fixed rate of return. Depending on how these bonds were purchased, they may have differing values. For example, electronic EE Bonds are sold at face value. There is a maximum purchase of $5000 annually. Paper EE bonds are sold at half of face value and have the same purchase cap. Interest is paid on these bonds and if redeemed during the first five years, the bondholder loses three months of interest.
Series H/HH Bonds are no longer being issued, the issuance was ended in 2004. Depending on the issue date, the bonds may still be earning interest. Bonds issued until December of 1979 paid interest until 2009 while bonds issued after 2004 will continue earning until 2024.
Series I Bonds are available only at face value with a $5,000 annual cap. They are available both in paper and electronic form. The interest for one quarter is forfeited if the bonds are redeemed within the first five years.
Redeeming Bonds
The registered owner of savings bonds are the only persons who are eligible to redeem them. Savings bonds are not transferable to any other person. The following steps are required to redeem bonds at a bank:
Verify that the bond has been held for the required period of time – Bonds that were issued after 2003 must have been held by the owner for not less than 12 months;
Provide identification – When redeeming savings bonds, the bank is required to obtain valid identification. There are certain types of identification which are not acceptable including credit cards, voter registration cards and several others. It is a good idea to contact the bank and ask what type of identification is acceptable;
Signing bonds – Savings bonds may only be signed in the presence of the person at the bank who is assisting in the redemption process. Never sign the bonds until such time as the bank approves the transaction. There may also be a limit on the dollar amount of bonds that may be redeemed at one time.
Using online options
There may be reason to redeem bonds online including deceased bond-holders and other reasons. In this case, a bondholder may go to the Treasury Retail Securities website that handles redemption in your individual state.
Missing bonds
For those who may not be able to locate the paper bonds, there is a process in place to help locate a missing bond. Form PDF 1048 may be mailed to Savings Bonds, Bureau of the Public Debt, P.O. Box 2186 Parkersburg, WV 26106-2186 in order to locate missing bonds free of charge.
Summary
Cashing in a savings bond does not have to be complicated provided that there is a basic understanding of the rules of savings bonds. Bonds that no longer are earning interest should be redeemed to allow the bond-holder additional savings options. It is also important to remember that redeeming bonds will incur a tax liability, a Form 1099-INT will be issued after redemption.