When Can I Cash Savings Bonds Without Paying Interest?

Paper bonds can be cashed at banks.
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Children and teens often receive savings bonds as gifts from relatives because as minors, they can’t buy the bonds for themselves. At some point, though, perhaps facing school expenses, it might be a good idea to redeem the bonds. The problem: redeeming them before a certain amount of time has elapsed means paying some of the bond’s interest as a penalty. You’ll pay three months' worth of interest if you cash in a bond too soon.

Bonds You Should Redeem

Bonds are investments for the long haul, with maturity dates far into the future. Mature bonds earn no interest, and cashing them in incurs no penalty. If you’ve inherited a mature bond, it should be cashed right away so that the money can be put to better use. All series A through H bonds have matured, as have series J and K bonds. Some series EE and HH bonds might also have reached maturity and can be redeemed without penalty as well. You can check some bonds for maturity at the U.S. Department of Treasury’s Treasury Hunt website.

Bonds You Can Redeem

Younger bonds belonging to series EE and HH may still be earning interest, having not reached maturity. No series I bonds are mature since the Treasury began issuing them in 1998 with 30-year terms. You still might be able to redeem immature bonds without paying the interest penalty, though. It depends on the bonds’ ages -- they must be at least five years old to avoid the penalty. Paper bonds list the issue date on the upper right-hand corner below the series letter. The issue dates of electronic bonds can be checked at the TreasuryDirect website.

Bonds to Hold

You’ll have to hold on to your youngest bonds if you don’t want to lose any interest. Series I, EE and the Patriot Bond all may be less than five years old and therefore subject to the penalty. Patriot Bonds were sold from 2001 to 2011, so the oldest of these actually are eligible for redemption without penalty. Patriot Bonds are, in effect, EE series bonds, except for the Patriot Bond label.

Timing Makes a Difference

If you can’t wait five years from a bond’s issue date to cash it, you still might face a wait to cash it because no bond can be redeemed before it’s 12 months old. Once the year has passed, time your redemption for just after a bond’s interest has been paid. HH bonds, for instance, pay interest every six months. If you want to know a bond’s value in different months, use the Treasury’s online Savings Bond Calculator. The interest the calculator shows will have automatically deducted any penalty you’ll pay.

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