How long to wait to cash Series EE bonds
While you can’t cash Series EE bonds within a year, you can redeem them any time after that. Pendergast points out that the longer you hold your bond, the more likely you are to benefit from it. Just remember, he says, that you’re only guaranteed to see double the face value when you hold the bond until maturity.
You can receive years of “extra” interest by holding the bond beyond the maturity date, but once 30 years have passed, you won’t accrue any extra interest.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it’s a good idea to cash them in because you won’t get any extra benefit.
In some cases, you might actually be better off cashing them in before maturity, Pendergast points out. If you can move the money into a more liquid investment vehicle with higher returns, it might make more sense depending on your goals for the money.
However, know that if you redeem the bond before five years pass, there’s a penalty: you lose the last three months of interest you earned. So, for example, if you cash in a Series EE bond after 2 years, you’ll get to keep the first 21 months of interest.
Interest accrual and compounding on Series EE bonds
Series EE bonds issued since May 2005 accrue interest at a fixed monthly rate, which is compounded semi-annually. If you have bonds bought prior to that, especially paper bonds, the U.S. Treasury offers a savings bond calculator that can help you figure out what you’ve earned — and what your bond is worth today.
Are Series EE Savings bonds a good investment?
A Series EE Savings bond could be a good investment if you’re looking for something that’s long term and low risk, since it’s backed by the Treasury and is guaranteed to double its value in 20 years.
However, 20 years to see only two times your initial investment might not help you meet certain goals. “Other vehicles like a 529 savings plan for education or even certain mutual funds offer greater returns with only slightly more risk,” Pendergast says.
Series EE Savings bonds also aren’t a good idea if you’re looking for something with liquidity. They’re not accessible unless you redeem the full value of the bond, and are required to be held for at least a year. For a more liquid (but still low-risk) investment, consider opening a high-yield savings account — many of these accounts are paying rates much higher than the rates on savings bonds.
Carefully consider what you plan to use the money for and its place in your portfolio. If you want a cash component and aren’t concerned about immediate liquidity, Series EE bonds might be the right choice. However, if you’re looking for growth, adding other assets to your portfolio can make sense.