How to Cash in Savings Bonds

Savings bonds are government-issued securities that accrue interest and increase in value over the length of the term, which can range from one year to 20 years. They aren't marketable -- that is, the original purchaser of a U.S. savings bond can't ever sell it to someone else, and no one except the original purchaser can ever cash in the bond (with a few exceptions). This differs from a Treasury bond, which is more akin to buying stock in the government; unlike savings bonds, they can be bought and sold on financial markets.

The first savings bonds were issued during World War I as a way to finance the U.S.'s involvement in the war [source: TreasuryDirect Kids]. At the time, they were known as Liberty Bonds, and savings bonds are still sometimes referred to as such.

The value of a savings bond depends on the types of bond it is, what form it's purchased in and when it was purchased. The most common are series EE (series E bonds are the same as series EE, but much older, so few of them remain and are no longer issued). A paper EE bond is purchased at half face value (i.e. $25 for a $50 bond). If purchased before 2005, they earn a variable interest rate based on the average five-year Treasury yield, recalculated every six months. Series EE paper bonds purchased after May 2005 pay a fixed interest rate. They mature after 20 years, at which point they can be redeemed for the face value (plus interest). They can be redeemed as soon as one year after they're issued, but if redeemed within five years of issuing, the bearer will forfeit three months of interest.

EE bonds purchased electronically act a little different. They're purchased at face value, and they will redeem for face value as soon as they can be redeemed (the five-year penalty still applies, however). Also, paper EE bonds are only sold in specific denominations ($50, $75, $100, $200, $500, $1,000, and $5,000, and $10,000), while electronic EE bonds can be purchased in any amount of $25 or greater.

Series I bonds are similar, but have a more complicated interest calculation. Other bond series, such as HH, pay out regular interest payments over the term of the bond, then are redeemed at face value [source: U.S. Department of the Treasury].

If you have some savings bonds and you're thinking of cashing them in, this article will explain how, and how to figure out how much they're currently worth.

Savings Bond Redemption Tables

There are plenty of savings bond value calculators available on the internet, but you can just download a pdf of all the redemption tables from the U.S. Treasury. To find the current value of your savings bond, find the correct series and the date of issue. This link shows bonds issued from 1941 to 2011, and displays their value if they were to be redeemed in April 2012. Find the value of your bond along the top row, marked "Redemp.Value." Cross-reference it to the month and year of your bond's issuance. The amount there is how much of the face value you'll receive upon redemption (these bonds are all less than face value because they haven't matured yet, but you can also find the value of matured bonds at the link). The next column over shows the interest earned on the bond. Add the two numbers together to determine the total amount you'll receive upon redemption.

Finally, look at the very last column, which shows percentage yield. You can see that fluctuations in interest rates affect the percentage from year to year, but overall you earn more from a bond the longer you hold it, up to 20 years, when it matures and no longer gains value or interest.

In the next section, we'll show you what you need to redeem a savings bond.

Requirements for Cashing in Savings Bonds

When it's time to cash in your savings bonds, you'll find the process relatively simple as long as you have the proper documentation. Remember that savings bonds can't be sold, traded or given away. The person whose name is on the bond is the only person who can cash it in (with some exception, which we'll get to shortly).

First, you obviously need the bond itself (if it's an electronic bond, there's really no process at all. You cash it in via the Treasury Web site, and the funds are deposited into your bank account). Make sure the bond is eligible to be cashed, though: It has to have been at least a year since it was issued (some bonds only require a six-month retention period).

Take your bond to your bank -- but not just any bank. It has to be one where you've had an account for at least six months. If that isn't possible, you can establish your identity using a government issued form of photo ID. A driver's license is most common. If you're using documentation like a driver's license to establish your identity, you'll be limited to cashing $1,000 worth of savings bonds. You'll then need to sign a request for payment form in front of a bank official, then confirm your social security number and current address.

A parent or guardian of a child who is the bearer of a savings bond can redeem the bond, as long as the child is too young to sign his or her name.

If the original owner of a bond has died, but someone else has been named as a beneficiary on the bond, the beneficiary can redeem the bond. Finally, in some cases a person with the legal authority to conduct business on the bond bearer's behalf can redeem the bond. This is typically someone acting on behalf of a deceased person's estate.

There are circumstances under which a bank can refuse to issue payment for a bond, or in fact may be legally unable to do so. In these cases, the bearer may have to visit a Federal Reserve Bank Savings Bond Processing Site to redeem the bond. You can find the locations of these sites at the Treasury Department's TreasuryDirect Web site.

Lots More Information

Sources

U.S. Department of the Treasury. "EE Savings Bonds In Depth." Accessed Nov. 10, 2011. http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds.htm
U.S. Department of the Treasury. "The Guide to Cashing Savings Bonds." Accessed Nov. 10, 2011. http://www.treasurydirect.gov/forms/sav0022.pdf
U.S. Department of the Treasury. "World War I (1914-1918) to the Great Depression (1929-1941)." Accessed Nov. 10, 2011. http://www.treasurydirect.gov/kids/history/history_wwi.htm