Savings bonds are a secure and reliable way to save money over time, offered by the U.S. Department of the Treasury. Many people hold these bonds, particularly Series EE and Series I bonds, as part of their long-term financial planning. When the time comes to access these funds, understanding the process of cashing in your savings bonds is essential. This guide provides a comprehensive overview of how to cash in both paper and electronic EE and I savings bonds, ensuring you can easily redeem your investments.
Cashing Paper EE or I Savings Bonds
For those holding traditional paper savings bonds, there are two primary methods for cashing them in: through a bank or directly with the Treasury Department.
Cashing at Your Local Bank
One of the most convenient ways to cash paper savings bonds is through your local bank, particularly if you have an existing account with them.
Steps to cash in at a bank:
- Contact your bank: Call or visit your local branch to inquire if they cash savings bonds. Not all banks offer this service, and policies can vary.
- Inquire about limits and requirements: Ask about any limits on the amount they will cash at one time and what forms of identification or documentation are required. Banks may have daily or transaction limits.
- Visit the bank with necessary documents: Typically, you will need to bring the original paper savings bonds, a valid photo ID (like a driver’s license or passport), and potentially proof of your Social Security number.
Important Considerations for Banks:
- Banks are not obligated to cash savings bonds and might refuse, especially if you are not a customer.
- Cashing limits apply, and they may not cash large amounts.
- For security reasons, banks need to verify your identity and bond ownership.
Cashing Savings Bonds Directly Through the Treasury Department
If your bank doesn’t cash savings bonds, or if you prefer to deal directly with the source, you can mail your bonds to the Treasury Department for redemption. This method is also necessary for bonds exceeding $1,000 in value, which requires signature certification.
Steps to cash in through the Treasury Department:
- Obtain FS Form 1522: Download and complete FS Form 1522, “Redemption Schedule.” This form is available on the TreasuryDirect website.
- Signature Certification (for bonds over $1,000): If the total value of the bonds you are cashing is over $1,000, you must have your signature certified by an authorized certifying officer. Instructions and requirements are detailed on Form 1522.
- Mail Form 1522 and Bonds: Send the completed form and the original paper savings bonds to the address specified on FS Form 1522. It’s advisable to send via certified mail for tracking and security.
Important Considerations for Treasury Department Cashing:
- Processing times can be longer compared to bank cashing.
- Signature certification adds a step for larger amounts but ensures security.
- This is a reliable option if banks are not convenient or accessible.
Cashing Electronic EE or I Savings Bonds
Electronic savings bonds offer a streamlined cashing process through TreasuryDirect, the online platform managed by the U.S. Department of the Treasury.
Redeeming Bonds Through TreasuryDirect
To cash in electronic savings bonds, you need a TreasuryDirect account.
Steps to cash in electronic bonds online:
- Log in to TreasuryDirect: Access your TreasuryDirect account using your account number and password.
- Navigate to ManageDirect: Once logged in, go to the “ManageDirect” section.
- Redeem Securities: Under “Manage My Securities,” click on “Redeem securities.”
- Follow the prompts: The system will guide you through the redemption process, allowing you to choose which bonds to cash and where to deposit the funds (typically your linked bank account).
Important Considerations for TreasuryDirect Redemption:
- You must have a TreasuryDirect account to manage and cash electronic bonds.
- The redemption process is primarily online, offering convenience and speed.
- Funds are typically deposited directly into your designated bank account.
Key Considerations for Electronic Bonds
- Partial Redemption: Unlike paper bonds, you can cash in a portion of an electronic bond, as long as you redeem for $25 or more and leave at least $25 remaining in the bond.
- Minimum Redemption Amount: The minimum amount you can redeem in a single transaction is $25.
Important Things to Know Before Cashing Savings Bonds
Regardless of whether you have paper or electronic bonds, several factors are crucial to understand before you decide to cash them in.
Holding Period and Interest
Savings bonds are designed for medium to long-term savings. You can cash an EE or I savings bond after owning it for just one year. However, to maximize returns, it’s beneficial to hold them longer.
- Minimum Holding Period: You must hold the bond for at least one year before cashing.
- Interest Penalty: If you cash a bond before five years, you will lose the last three months of interest earned.
- Maximum Interest Earning Period: EE and I bonds earn interest for up to 30 years. The longer you hold, the more interest accrues, up to this limit.
Tax Implications
When you cash in savings bonds, the interest earned is subject to federal income tax.
- Form 1099-INT: You will receive a Form 1099-INT detailing the interest earned in the year you cash the bond.
- If you cash bonds at a bank, the bank is responsible for providing this form.
- If you cash bonds directly with the Treasury, they will mail you the form in January of the following year, or it will be available in your TreasuryDirect account for electronic bonds.
- State and Local Taxes: Savings bond interest is exempt from state and local taxes, offering a tax advantage compared to some other investments.
Calculating Your Bond Value
Before cashing, it’s wise to know the current value of your savings bond to make informed financial decisions.
- Savings Bond Calculator: The TreasuryDirect website provides a Savings Bond Calculator tool. You can input the series, denomination, and issue date of your bond to calculate its current value.
- TreasuryDirect Account: For electronic bonds, your current holdings and values are readily available within your TreasuryDirect account.
Conclusion
Cashing in savings bonds, whether paper or electronic, is a straightforward process once you understand the steps and considerations involved. By choosing the method that best suits your needs and being aware of holding periods, tax implications, and bond values, you can effectively manage and redeem your savings bond investments. Always ensure you are dealing with reputable institutions or directly with TreasuryDirect to protect your assets and financial information.
