How Long Before You Can Cash in a Bond?

The United States Treasury periodically issues bonds to investors and the general public for the purpose of increasing public funding. All such bonds have a date of maturity and will automatically cash in when that maturity date arrives. Only some bonds, namely savings bonds, may be cashed in at a time before their maturity date. However, interest penalties may apply.

When people refer to bonds, they are most often referring to Treasury bonds. Treasury bonds have a 30-year term until maturity and interest is paid on them every six months until the maturity date arrives. Treasury notes are similar, but they have terms that range from two to 10 years. Treasury Inflation-Protected Securities (TIPS) have principals that vary with the consumer price index, and treasury bills are bonds sold at a discount at an auction. Treasury bonds, bills, TIPS and notes cannot be simply cashed in, they only pay out when the maturity date arrives. You may, however, decide to sell the bond to another investor, in which case you should contact your stockbroker.

In contrast to the conventional government bonds and bills, savings bonds are essentially products offered by the government to individuals wishing to invest in a long-term savings plan. They are considered reliable and low-risk, and EE/E savings bonds purchased after May 1, 2005 have a fixed rate of return. Before this time, the interest was based on five-year Treasury security yields, thereby making the rate of return variable. EE/E savings bonds may be cashed in when the bond is more than 12 months old. If the bond is less than five years old, you will accrue a penalty of three months interest. The bonds may be cashed at most financial institutions and banks.

I savings bonds are very similar to EE/E saving bonds, except that they offer a fixed rate of return in combination with a variable rate that is tied to the inflation rate in both March and September of each year. They may be redeemed in the same manner as EE/E savings bonds and are bound by the same rules -- i.e. they cannot be cashed in if they are less than 12 months old and will accrue a three-month interest penalty if less than five years old.

HH/H bonds ceased being issued on September 1, 2004. They were once exchangeable for EE/E bonds, however, this is no longer the case. The interest rate paid on HH/H savings bonds fluctuated during the 10 years of the lifetime of the bond. These bonds may be cashed in at any time at any financial institution. They are not bound by the same restrictions as the EE/E and I savings bonds.