How do ee series bonds work

Here we'll review what savings bonds are, how they make money over time, how to figure out the value of your savings bonds, and how to cash in your savings bonds. Savings bonds are securities that the U. When you buy a U. Savings bonds are considered low-risk investments because they're backed by the U. In other words, the probability of the U.

Therefore, the risk to the individual investor is also extremely small, especially compared to stock market investments. When you buy a savings bond , you'll earn compound interest. With the two primary types of savings bonds — Series I and Series EE — you'll earn interest that compounds semiannually, so, every six months, interest is added to the principal amount. Then, for the following six months, interest is calculated on the new, and higher, principal amount.

Savings bonds are the only government bonds that earn compound interest. You'll only pay tax at redemption — or at the time you cash in the bond. You have the option of reporting interest as it's earned throughout the life of the bond, but you'll only be liable for tax once the bond has been cashed.

Series I and Series EE bonds are also tax-exempt on the state and local levels. That means you'll still owe tax to the IRS, but you'll be spared any tax obligation beyond that. Further, if you use savings bonds to cover qualified educational expenses and you were at least 24 years old when you purchased the bonds, you'll also be exempt from paying federal tax on any bond interest earned.

You're able to name a survivor as the beneficiary of the bond who would become the immediate owner if you were to die unexpectedly. The survivor would have the option of doing nothing holding the bond until it matures , cashing in the bond, or having it reissued in their name.

If no survivor is named, the savings bond would become part of the deceased person's estate, much like any other asset without a named beneficiary. A wealth of detailed information about savings bonds is also available on the TreasuryDirect website. You can figure out the value of your bonds on the TreasuryDirect website, which is the central repository for the sale and valuation of government-issued bonds. You also should know how to file a claim if you've lost a bond or had one stolen or destroyed.

Investing Bonds. Some Series EE bonds pay interest beyond the original maturity date, up to 30 years from issuance. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Savings Bonds Definition A U. How War Bonds Originated and How Investors Made Money on them A war bond is is a form of government debt that seeks to raise capital to fund war efforts from the public.

TreasuryDirect Definition Investors can purchase federal securities—U. Partner Links. Related Articles. Bonds How to Give Bonds as a Gift. Fixed Income Essentials U. Savings Bonds: Series EE vs. Series I: What's the Difference? Fixed Income Essentials Using U. Savings Bonds As a Long-term Investment. Bonds vs. Bills and Notes: What's the Difference? Certificate of Deposits CDs U. Savings Bonds vs. We're pleased to hear from our customers regarding their satisfaction with our website. Although your browser settings don't allow you to view the website survey we're conducting, please e-mail your comments.

As of January 1, , paper savings bonds are no longer sold at financial institutions. Series EE savings bonds are low-risk savings products that pay interest until they reach 30 years or you cash them, whichever comes first. The only way to buy EE bonds is to buy them in electronic form in TreasuryDirect. We no longer issue EE bonds in paper form. As a TreasuryDirect account holder, you can purchase, manage, and redeem EE bonds directly from your web browser.

As of , U.