How to Cash In Savings Bonds: A Step-by-Step Guide

Savings bonds are a secure and reliable investment, often purchased for oneself or as gifts. When the time comes that you need to access these funds, understanding How To Cash In Savings Bonds is essential. This guide will walk you through the process, whether you hold paper bonds or electronic bonds, ensuring you get your money efficiently and understand any potential implications.

Understanding Your Savings Bonds: EE and I Bonds

This guide focuses on Series EE and Series I savings bonds, the most common types currently issued. These bonds earn interest over time, making them a valuable asset. It’s important to note that while your money is safe, there are specific rules about when and how you can cash them in.

When Can You Cash In Your Savings Bonds?

You can cash in both paper and electronic EE or I savings bonds after owning them for at least one year. However, to maximize your returns, consider the following:

• Minimum Holding Period: You must hold the bond for at least one year before you can cash it.
• Interest Penalty: If you cash in your bond before it reaches five years old, you will lose the last three months’ worth of interest. For example, if you cash a bond at 18 months, you’ll only receive interest earned for the first 15 months.
• Maturity: EE and I bonds earn interest for up to 30 years. The longer you hold them, the more interest they accrue, up to this maturity period. Cashing them in before maturity may mean missing out on potential earnings.

Therefore, while you can cash your bonds after one year, it’s generally more financially advantageous to hold them for at least five years to avoid the interest penalty and even longer to maximize interest earnings up to 30 years.

How to Cash Paper Savings Bonds

For those holding traditional paper savings bonds, here are the methods for cashing them in:

Cashing Paper Bonds at a Bank or Credit Union

The most convenient way for many to cash paper savings bonds is through a local bank or credit union.

1. Contact Your Bank: Before visiting, call your bank or credit union to ask:

   • Do they cash savings bonds? Not all banks offer this service.
   • What is their limit on the amount they will cash at one time? Some banks have daily or transaction limits.
   • What forms of identification and documentation are required? Typically, you’ll need a valid government-issued photo ID.

2. Visit the Bank: Bring your paper savings bonds and the required identification to your bank. Be prepared to fill out a form for cashing the bonds.

Important Note: Banks are not obligated to cash savings bonds, especially if you are not an account holder. If your bank doesn’t offer this service, or if you need to cash a large value of bonds, consider the next option.

Cashing Paper Bonds Directly Through TreasuryDirect (By Mail)

You can also cash paper savings bonds directly through the U.S. Department of the Treasury via mail. This method is particularly useful for large amounts or when your bank cannot assist.

1. Obtain FS Form 1522: Download and complete FS Form 1522, Redemption Request for Paper Savings Bonds. You can find this form on the TreasuryDirect website or through a general online search.

2. Signature Certification (if needed): If the total value of the bonds you are cashing is over $1,000, your signature on Form 1522 must be certified. Signature certification can be obtained from:

   • A notary public
   • An officer of a bank, credit union, or savings and loan association

   Form 1522 provides detailed instructions on signature requirements and who can certify your signature.

3. Mail Form and Bonds: Send the completed FS Form 1522 and your original paper savings bonds to the address specified on the form:

   Treasury Retail Securities Services
   P.O. Box 9150
   Minneapolis, MN 55480-9150

   Important: Do not send copies of your bonds; you must send the original paper bonds. It is recommended to send via certified mail with tracking for security.

Special Circumstances for Paper Bonds

There are specific procedures for cashing paper savings bonds in unique situations. The TreasuryDirect website offers dedicated pages for these scenarios:

• Cashing savings bonds outside the United States
• Cashing a young child’s bond
• Affected by a disaster
• Death of a savings bond owner
• Living estates
• Trusts

If your situation falls into any of these categories, it is crucial to consult the specific guidance provided by TreasuryDirect.

How to Cash Electronic Savings Bonds

Electronic savings bonds are managed online through TreasuryDirect.gov, making the cashing process straightforward digitally.

Redeeming Electronic Bonds Online via TreasuryDirect

1. Log into your TreasuryDirect Account: Go to TreasuryDirect.gov and log in to your account.

2. Access ManageDirect: Navigate to the “ManageDirect” section of your account.

3. Redeem Securities: Under “Manage My Securities,” click on “Redeem securities.”

4. Follow the Prompts: TreasuryDirect will guide you through the redemption process. You will typically need to:

   • Select the bonds you wish to cash.
   • Specify the amount you want to redeem (you can cash part or all of a bond in your TreasuryDirect account, with a minimum of $25 and leaving at least $25 remaining in the bond if partially cashing).
   • Choose your designated bank account for the funds to be deposited.

5. Review and Submit: Double-check all details before submitting your redemption request. The funds are usually deposited into your bank account within a few business days.

For visual assistance, TreasuryDirect offers a Help Video demonstrating the electronic redemption process.

Key Considerations Before Cashing

Before you cash in your savings bonds, keep these points in mind:

Calculating Your Bond Value

To know how much your bond is currently worth, use the official Savings Bond Calculator. This tool factors in the bond series, issue date, and denomination to provide an accurate value, including accrued interest. For electronic bonds, you can also check the current value within your TreasuryDirect account under “Current Holdings.”

Tax Implications

Interest earned on savings bonds is subject to federal income tax, but it is exempt from state and local taxes.

• Form 1099-INT: When you cash savings bonds, you will receive a Form 1099-INT detailing the interest earned for tax purposes.
  • If you cash paper bonds at a bank, the bank is responsible for providing you with Form 1099-INT.
  • If you cash paper bonds through TreasuryDirect or electronic bonds online, TreasuryDirect will make your 1099-INT available in your TreasuryDirect account (typically by January of the following year) or mail it to you.

Consult Tax information for EE and I savings bonds for comprehensive details on taxation.

Cashing Limits

• Paper Bonds at Banks: Banks may have limits on the value of savings bonds they will cash at one time. Inquire with your bank about their specific policies.
• Paper Bonds via TreasuryDirect: There is no limit on the value or number of paper savings bonds you can cash when redeeming directly through TreasuryDirect, as long as you meet the requirements.
• Electronic Bonds: Within TreasuryDirect, you can redeem any amount of $25 or more, down to the penny. If you partially redeem an electronic bond, you must leave at least $25 in the bond’s remaining value.

Conclusion

Knowing how to cash in savings bonds empowers you to access your invested funds when needed. Whether you possess paper or electronic bonds, understanding the process, considering the holding periods for optimal returns, and being aware of tax implications ensures a smooth and informed experience. By following this guide and utilizing resources like the Savings Bond Calculator and TreasuryDirect, you can confidently manage and cash your savings bonds effectively.