Key takeaways
- U.S. savings bonds are non-interest-bearing securities offered by the Treasury and guaranteed by the U.S. government, rendering them among the most secure investment choices out there.
- Currently, Series EE bonds yield an annual rate of 2.70%, whereas Series I bonds offer a higher return at 3.98% along with added protection against inflation due to their variable interest rates.
- Savings bonds have to be kept for a minimum of one year before they can be redeemed. If you choose to cash them out within five years, you will lose the equivalent of the past three months’ worth of interest.
- Unlike conventional bonds, savings bonds aren’t tradable among various investors; they can only be redeemed directly through the government.
Savings bonds represent a form of debt instrument provided by the U.S. government. These differ from standard bonds as they do not distribute regular interest payments; instead, savings bonds function like zero-coupon bonds, accruing interest until redemption by their holder. Additionally, these securities cannot be transferred to another party, setting them apart from other types of bonds.
more typical bonds
.
When thinking about including U.S. savings bonds in your individual saving strategy, it’s crucial to understand their functionality and evaluate if they align with your monetary objectives better than options such as various investment accounts.
high-yield savings account
.
What exactly is a savings bond?
Purchasing savings bonds offers a straightforward method for people to lend money directly to the government and earn a profit on their contribution.
Bonds are issued at a price below their face value; for instance, a $50 Series EE bond might be purchased for $25. These bonds accumulate interest over time.
your gains are compounded
This means that interest accrues on previously accumulated interest.
U.S. savings bonds have several distinctive features compared to conventional bonds:
-
Government backing
A U.S. savings bond represents a secure method for saving funds, offered by the Treasury and guaranteed by the U.S. government. -
Interest payment structure
Savings bonds accrue interest until they are cashed in by their owners, with a maximum earning period of up to 30 years. -
Redemption process
Electronic bonds can be redeemed on the TreasuryDirect website, whereas paper bonds can typically be cashed in at most bank or credit union locations.
| Traditional bond | Savings bond |
|---|---|
| Distributes cash interest regularly | It pays out the accumulated interest when you cash it in. |
| matures on a particular date | Can be claimed anytime beginning one year following the issuance date. |
| The owner is responsible for paying taxes on the interest received. | The owner has the option to report the tax interest income upon receipt or opt for annual reporting instead. |
| Usually liable for local, state, and federal taxes | Subject only to federal taxes |
| The buyer has the option to acquire the bond with any sum of money at their convenience. | The purchaser is restricted to a maximum of $10,000 per bond series ($20,000 overall) annually. |
What is the mechanism behind savings bonds?
Savings bonds function by earning interest, and they
earned interest compounds
Although a savings bond accumulates interest gradually, this accumulated interest is not distributed until the bond is cashed in.
U.S. savings bonds can solely be cashed in by their owners and cannot be sold to others. These bonds may be redeemed either through the government itself or at a financial institution for paper bonds.
U.S. savings bonds can be bought directly from the U.S. government through the Treasury Department’s portal.
TreasuryDirect website
Series EE and Series I bonds can be bought in digital format.
Electronic savings bonds can be bought with any value ranging from $25 to $10,000, whereas paper bonds have fixed values of $50, $100, $200, $500, and $1,000. For paper bonds, an individual may purchase up to $5,000 annually.
Should a paper bond get lost, stolen, damaged, or severely defaced, you may request for an electronic replacement bond.
Various kinds of savings bonds
U.S. savings bonds are available in three series, with only two being currently issued.
The U.S. government initially released
Series E bonds
To finance itself during World War II, and it kept selling them until 1980, at which point Series EE bonds replaced them. The issuance of Series E bonds has ceased.
Series EE bonds
Series EE bonds were introduced in 1980 and are still being issued presently. These financial instruments might offer a fluctuating interest rate if they were purchased between May 1997 and April 2005, whereas those bought starting from May 2005 have a constant interest rate.
Bonds of Series EE issued between May 1, 2025, and October 31, 2025, will have an annual interest rate of 2.70 percent.
Series I bonds
Series I bonds
Offer more robust defense against inflation compared to Series EE bonds: These instruments feature both a guaranteed fixed rate along with an adjustable inflation component, which is established semi-annually according to the consumer price index.
I bonds released between May 1, 2025, and October 31, 2025, come with an increased annual yield of 3.98%, subject to change based on varying inflation rates.
Is investing in savings bonds worthwhile?
Advantages
|
Disadvantages
|
Seeking higher yields with greater versatility?
Newsinpo.Space’s guide to top high-return savings accounts
To locate choices providing more than 4 percent APY with complete accessibility and FDIC insurance.
Ways to Redeem Savings Bonds for Cash
Series EE and Series I bonds can both be redeemed after being held for one year. However, if you decide to cash them in before reaching the five-year mark, you will forfeit the interest from the most recent three months.
Each set of bonds generates interest over a maximum period of 30 years. The longer you keep the bond, the greater the amount of interest it accumulates; however, this accumulation halts once the 30-year threshold is surpassed.
Electronic bonds
Electronically purchased bonds can be redeemed on the TreasuryDirect site by logging into your account and adhering to the specified steps for redemption. The monetary worth of the bond will be transferred to your designated checking or savings account within two business days after the redemption process is completed.
At least $25 must be redeemed to obtain an electronic bond.
Paper bonds
Paper bonds can usually be redeemed at most banks or credit union locations. While generally there isn’t an upper cap on cashing these bonds, individual institutions might set their own limits on the maximum amount you can redeem at once.
Treasury savings bonds versus corporate bonds
Although the government releases U.S. savings bonds,
corporate bonds
are sold by companies looking to raise funds to build their capital. The company offers fixed or variable interest rates paid out at regular intervals until the bond’s maturity date.
When considering an investment in a corporate bond, you should examine the ratings provided by three major credit-rating firms: Standard & Poor’s Global Ratings, Moody’s Investors Service, and Fitch Ratings. Bonds with a Triple-A grade represent the pinnacle of financial stability, whereas those classified as “junk bonds” signify higher risk due to their lower quality status.
Unlike with savings bonds, you have the option to sell corporate bonds before they mature, though doing so means accepting less than their full face value. Savings bonds, however, aren’t transferable to other investors; instead, you may cash them out at par plus accrued interest once a minimum holding period of one year has passed.
|
Savings bond |
Corporate bond |
|
|
Interest |
Returns are generally less than those of corporate bonds, often ranging from about 3 percent to 4 percent. | The level of interest varies significantly depending on what the company provides. Returns can range from 4 percent to 6 percent. |
|
Accessibility |
You have the option to encash a savings bond starting from one year after your purchase date. However, doing so within the initial five-year period means you’ll lose out on certain interest payments. | In order to receive the entire face amount of the bond, you have to wait until it reaches its maturity date. If you decide to sell the bond prematurely, you’ll forfeit part of its stated face value. |
|
Safety |
Supported by the U.S. government | Released by the corporation and occasionally supported by company assets, corporate bonds carry more risk compared to U.S.-supported savings bonds. |
Savings accounts compared to savings bonds
While both U.S. savings bonds and numerous savings accounts are guaranteed by the U.S. government, they differ in terms of their interest rates and how easily you can access your money.
| Savings accounts | Savings bonds | |
|---|---|---|
|
Interest |
A lot of high-yield savings accounts are now offering better interest rates compared to savings bonds. | Currently, Series EE bonds generate less interest compared to numerous savings accounts, whereas Series I bonds offer returns that align well with those of competing savings accounts. |
|
Accessibility |
Funds can typically be withdrawn up to six times per month without incurring penalties. However, certain banks do not impose such limits, offering greater flexibility for withdrawals. | A bond cannot be redeemed for at least a year, and there’s a penalty if you try to cash it in before five years have elapsed. |
|
Safety |
Supported by the U.S. government | Supported by the U.S. government |
You could opt for a high-yield savings account if you aim to grow your savings while retaining the flexibility to access your money whenever needed. Conversely, a savings bond can be chosen for predictable earnings as part of your investment plan.
Bottom line
Treasury savings bonds are some of the most secure investments.
investment types
Just like any government-supported investment such as online high-yield savings accounts, these bonds can be considered secure. Before committing to a savings bond, important aspects to ponder include the interest rate provided and your timeline for needing the money.
An additional secure option to consider instead of savings bonds and savings accounts is certificates of deposit. They often provide better interest rates and are typically available through federally insured banks and credit unions. Make sure to check
newsinpo.space’s best CD rates
To evaluate present options and discover the appropriate term for your requirements.
