Series EE bonds are a type of savings certificate issued by the U.S. government through the Treasury Department. Savings bonds can be purchased at banks, through payroll savings plans and direct from the Treasury at the Treasury Direct website. Series EE bonds have been sold with several different rate structures, and bond owners need to understand how the current value of their bonds is calculated.
Series EE bonds are sold in two forms. Paper bonds are issued with specific face amounts and a cost of one-half of the face amount. Face amounts range from $50 to $10,000, and the initial cost will be $25 to $5,000. Electronic Series EE bonds have a minimum investment of $25 and no future face amount. Electronic bonds can be purchased in any amount up to $5,000. For example, an electronic bond could be purchased for $105.67. In paper bonds an individual would have to buy a $200 bond with a cost of $100.
Series EE bonds issued since May 2005 will pay a fixed rate of interest for the life of the bond. Savings bonds continue to accrue interest for up to 30 years. The interest is accrued to individual bonds every month and compounds every six months. The U.S. Treasury resets the rate for new bonds on the first of May and November. Bonds sold between May 1995 and April 2005 earn market rates that are reset every six months and based on the average of the five-year Treasury note. All Series EE bonds are guaranteed to at least double in value in 20 years. If the interest is not enough to double the bond, at the 20 point, a one-time adjustment will be added to the bond's value.
Series EE savings bonds cannot be redeemed for one year after purchase. Bonds redeemed in the first five years will incur a three-month interest penalty. Bond values up to $1,000 can be redeemed at any bank with proper identification. Bonds are issued to specific individuals, and only the registered owner can redeem bonds. Bonds have a serial number and issue date that can be used to track or replace lost bonds.
The Treasury Direct website has several tools to determine the redemption or current value of savings bonds. Under the Tools section of the Treasury Direct website there is a savings bond calculator where you can enter the data of a particular bond and obtain the current redemption value (see Resources). The Tools section also offers the Savings Bond Wizard, which is downloadable software that will track and update the values of a portfolio of savings bonds. Finally, the website has savings bond earnings reports and redemption value tables that are downloaded as PDF documents. These documents are updated every six months.
Series EE savings bonds are U.S. Treasury guaranteed savings certificates that can be purchased with as little as $25. Savings bonds can be owned by minors as investments. The interest earnings on savings bonds is exempt from state income taxes. The interest is also tax-deferred for federal income taxes. No income tax is due on savings bond interest until the bonds are redeemed. The current rate of interest for new Series EE bonds is provided in Resources.
- Treasury Direct: EE Savings Bonds in Depth
- TreasuryDirect. "Timeline of U.S. Savings Bonds." Accessed March 23, 2020.
- Department of the Treasury. "Introduction to Savings Bonds." Accessed March 23, 2020.
- New York State. "Certain Basics of Municipal Bonds." Accessed March 23, 2020.
- TreasuryDirect. "Series EE Savings Bonds." Accessed March 23, 2020.
- Federal Register. "United States Savings Bonds, Series EE, HH and I." Accessed March 23, 2020.
- TreasuryDirect. "Convert Your Paper Savings Bonds Using SmartExchange." Accessed March 23, 2020.
- Securities and Exchange Commission. "Zero Coupon Bonds." Accessed March 23, 2020.
- TreasuryDirect. "May 2005 and Later (EE Bond Rates and Terms)." Accessed March 23, 2020.
- TreasuryDirect. "Comparing Series EE and Series I Savings Bonds." Accessed March 23, 2020.
- Department of the Treasury. "Interest Accrual Dates for Series E, Series EE, and Series I United States Savings Bonds, and Savings Notes," Pages 1-2. Accessed March 23, 2020.
- TreasuryDirect. "Cashing (Redeeming) EE and E Savings Bonds." Accessed March 23, 2020.
- TreasuryDirect. "Buying Series EE Savings Bonds." Accessed March 23, 2020.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.