A Series EE bond's value grows over time, but it starts at half its face value

When you buy a Series EE bond, you pay half of what the bond says it is worth. If you buy a $100 Series EE bond, you pay $50. That $50 is your cost. The bond's face value — the amount printed on it — is $100, but you do not own $100 worth of value on day one.

The bond earns interest over time. That interest is added to your $50, slowly bringing the bond's total worth closer to $100 and then beyond it. The longer you hold the bond, the more interest it accumulates, and the more your bond is worth.

The Treasury sets the interest rate for Series EE bonds every six months. The rate changes, so a bond you buy today will earn a different rate than one you buy six months from now. You can find the current rate on the TreasuryDirect website before you buy.

Key Takeaways

  • You pay half the face value when you buy a Series EE bond, so a $100 bond costs $50 upfront.
  • The bond earns interest every month, and that interest is added to the bond's value automatically.
  • Series EE bonds are may provide to reach their face value in 20 years, even if interest rates are very low.
  • The longer you hold a Series EE bond past 20 years, the more interest it continues to earn, up to 30 years total.
  • You can check your bond's current worth on TreasuryDirect or by contacting the Treasury.

How interest is added to your bond each month

Series EE bonds earn interest monthly. That means every month, a small amount of interest is calculated and added to your bond. You do not receive this interest as cash — it stays inside the bond and becomes part of what the bond is worth.

The interest rate is fixed for the life of your bond. If you buy a Series EE bond when the rate is 4.30 percent per year, that bond will earn 4.30 percent per year for as long as you own it. The rate does not change after you buy, even if Treasury rates go up or down.

Because interest is added every month and compounds (meaning you earn interest on your interest), the bond's value grows faster as time passes. After one year, your $50 bond might be worth $52. After five years, it might be worth $61. After 20 years, it will be worth at least $100.

The 20-year may provide and what happens after

The Treasury guarantees that your Series EE bond will be worth at least its face value after 20 years. This means if you buy a $100 bond for $50, you are may provide to have at least $100 after 20 years, no matter what interest rates do in the meantime.

If interest rates are very low during your holding period, the Treasury will make up the difference so you still reach face value at the 20-year mark. This may provide is why Series EE bonds are considered very safe — you cannot lose money, and you are protected against a scenario where interest rates stay low for two decades.

After 20 years, your bond does not stop earning interest. It continues to earn at the same rate until it reaches 30 years old. At that point, the bond stops earning interest and you should cash it in. If you hold it past 30 years, you are no longer earning anything on your money.

Checking what your bond is worth right now

If you own Series EE bonds, you can find out their current worth through TreasuryDirect, the official website where the Treasury manages savings bonds. You log in with your account, and the site shows you each bond you own and its current value.

You can also contact the Treasury's Savings Bond Operations office by phone or mail if you do not have online access. They can tell you the value of any bond if you provide the serial number and issue date.

The value shown is what you would receive if you cashed the bond in today. If you have held the bond for less than one year, there is a penalty — you lose the last three months of interest. After one year, you can cash it without penalty.

Why you might hold a Series EE bond longer than you need to

Series EE bonds are not meant to be cashed in quickly. They are designed as long-term savings. The penalty for cashing in during the first year (losing three months of interest) discourages early withdrawal. After that, there is no penalty, but the bond keeps earning, so there is a reason to hold it.

Some people hold Series EE bonds specifically to use the money for education. If you cash in a Series EE bond and use the money to pay for college tuition or fees, you may not have to pay federal income tax on the interest you earned. This is called the education tax exclusion, and it has income limits and other rules. You would need to check whether you may have access to.

Others hold Series EE bonds simply because they are safe and predictable. You know exactly what rate you are earning, and you know the Treasury will not let you lose money. That certainty appeals to people who want to set money aside and not worry about it.

The difference between what you paid and what it is worth

The gap between your purchase price and your bond's current worth is the interest you have earned. If you paid $50 for a $100 Series EE bond and it is now worth $75, you have earned $25 in interest.

That $25 is taxable income to you in the year you cash the bond in. You will receive a Form 1099-INT from the Treasury showing the interest amount, and you report it on your federal tax return. Some people hold their bonds into a year when their income is lower, so the tax hit is smaller.

Series EE bonds do not earn state or local income tax — only federal tax applies. This is one reason they appeal to people in high-tax states.

Frequently Asked Questions

Can a Series EE bond be worth less than what I paid for it?

No. The Treasury guarantees that after 20 years, your bond will be worth at least its face value. If you bought a $100 bond for $50, it will be worth at least $100 after 20 years. Before 20 years, if you cash it in during the first year, you lose three months of interest, but you still get back at least what you paid.

What happens if I cash in my bond before it reaches face value?

You receive whatever the bond is worth at that moment. If you bought a $100 bond for $50 and cash it in after five years when it is worth $61, you get $61. If you cash it in during the first year, you lose the last three months of interest, so you would get less than the bond earned.

Do I have to pay taxes on the interest every year, or only when I cash it in?

You can choose either way. Most people wait until they cash the bond to report the interest as income. But you can also report the interest each year if you want to. Once you choose a method, you have to stick with it for all your Series EE bonds.

Will my Series EE bond ever be worth more than its face value?

Yes. After 20 years, if interest rates have been normal or high, your bond will be worth more than its face value. A $100 bond might be worth $120 or $130 or more, depending on the rate you locked in when you bought it. It continues earning until it is 30 years old.

How do I know what interest rate my bond is earning?

The rate is set on the issue date — the month and year you bought the bond. You can find historical rates on the TreasuryDirect website. Your bond earns that same rate every month for its entire life, so the rate never changes after you buy.