A savings bond is a loan you make to the U.S. government. You buy the bond, the government pays you interest over time, and you get your money back when you cash it in. Because they’re backed by the full faith and credit of the United States, savings bonds are among the safest investments available. The Treasury currently offers two types: Series EE and Series I, each with a different approach to earning interest.
How Series EE Bonds Work
Series EE bonds pay a fixed interest rate that stays the same for at least the first 20 years. Bonds issued from November 2025 through April 2026 carry a rate of 2.50%. That fixed rate might not sound exciting, but EE bonds come with a unique guarantee: the Treasury promises your bond’s value will double after 20 years. If the fixed rate alone wouldn’t get you there, the government makes up the difference at the 20-year mark. That guaranteed doubling effectively works out to a minimum return of about 3.5% per year if you hold for the full 20 years.
After 20 years, the rate may change for the bond’s final 10 years. EE bonds reach final maturity at 30 years, at which point they stop earning interest entirely.
How Series I Bonds Work
Series I bonds (commonly called I bonds) have a two-part interest rate. One piece is a fixed rate, locked in when you buy. The other is a variable inflation rate that the Treasury recalculates every six months, in May and November, based on changes in the Consumer Price Index. Your composite rate is the combination of these two components.
For bonds issued from November 2025 through April 2026, the composite rate is 4.03%, built from a 0.90% fixed rate and a 1.56% semiannual inflation rate. That composite rate resets every six months for the life of the bond, though the fixed portion never changes. The Treasury guarantees the overall rate will never drop below zero, so even in a period of deflation, you won’t lose principal.
Like EE bonds, I bonds have a 30-year term.
Interest Accrual and Compounding
Both EE and I bonds earn interest monthly. That interest compounds semiannually, meaning every six months the Treasury adds your accumulated interest to the bond’s principal and then calculates future interest on that higher amount. You don’t receive interest payments along the way. Instead, the value of the bond grows, and you collect everything when you cash it in.
How Much You Can Buy
You can purchase up to $10,000 in EE bonds and $10,000 in I bonds per calendar year through TreasuryDirect, the government’s online platform. Those limits apply per person (technically, per Social Security number), so a married couple could buy up to $20,000 in each type annually between them. Both series are available only in electronic form through TreasuryDirect.
You can buy bonds in any amount down to the penny, starting at $25. There’s no need to purchase in traditional denominations like $50 or $100, though you can if you prefer round numbers.
Buying Bonds on TreasuryDirect
To purchase savings bonds, you need a TreasuryDirect account at treasurydirect.gov. Setting one up requires your Social Security number, a U.S. address, a checking or savings account for funding, and an email address. After you complete the application, you’ll receive your account number by email within minutes.
Once your account is active, you link a bank account and buy bonds directly. The money is pulled from your bank, and the bonds appear in your TreasuryDirect account. You can also buy bonds as gifts for someone else, including minor children, by purchasing them in the recipient’s name.
When You Can Cash In
Savings bonds have a minimum holding period of 12 months. You cannot redeem them for any reason before that first year is up.
If you cash in a bond between one and five years after purchase, you forfeit the last three months of interest as a penalty. For example, if you redeem an I bond after 18 months, you’d receive 15 months’ worth of interest instead of 18. After five years, there’s no penalty, and you can cash in anytime through your TreasuryDirect account with no fees.
Bonds stop earning interest at the 30-year mark. If you have bonds that have reached final maturity, there’s no benefit to holding them any longer.
Tax Treatment
Interest earned on savings bonds is subject to federal income tax but exempt from state and local income taxes. That state tax exemption can make savings bonds slightly more attractive compared to a bank CD or savings account, especially if you live in a state with a high income tax rate.
You have a choice about when to report the interest. Most people wait and pay taxes on all the accumulated interest in the year they cash the bond in. Alternatively, you can elect to report interest annually as it accrues, though few people choose this route since the bonds don’t pay out cash along the way.
There’s also a potential education benefit. If you use savings bond proceeds to pay for qualified higher education expenses, the interest may be partially or fully excluded from federal income tax, subject to income limits and other requirements.
What to Do With Paper Bonds
The Treasury no longer sells paper savings bonds, but millions of older paper bonds are still in circulation. If you have paper EE or I bonds, you can convert them to electronic form through TreasuryDirect. The process involves setting up a conversion linked account, entering your bond details online, printing a manifest form, and mailing the physical bonds along with the signed manifest to the Treasury.
You can also cash paper bonds at most banks and credit unions without converting them first. Bring a valid photo ID, and the institution will redeem them and deposit the proceeds into your account. If you find old paper bonds that have reached their 30-year maturity, cash them promptly since they’re no longer earning anything.
Who Savings Bonds Make Sense For
Savings bonds aren’t designed to compete with stock market returns. They’re built for safety, simplicity, and modest, predictable growth. I bonds are particularly useful as an inflation hedge since their rate adjusts with consumer prices. EE bonds appeal to people with a specific 20-year goal, like supplementing retirement income, thanks to the guaranteed doubling.
The $10,000 annual purchase limit means savings bonds work best as one piece of a larger savings strategy rather than a primary investment vehicle. But for money you want to keep extremely safe while earning more than a typical savings account, they fill a practical role that few other investments match.