Steps to Cashing Paper Savings Bonds

Quick answer

• Locate your paper savings bonds and gather necessary identification.
• Determine if the bond is mature and eligible for redemption.
• Visit your local bank or credit union with the proper forms.
• Understand that Series EE and I bonds are typically held for at least one year.
• Be aware of potential tax implications on the accrued interest.
• If the bond owner is deceased, you’ll need to provide death certificates and proof of inheritance.

Who this is for

• Individuals who have inherited paper savings bonds.
• People who have held onto paper savings bonds for a long time and wish to access their funds.
• Savers looking to understand the process of redeeming U.S. savings bonds they physically possess.

What to check first (before you act)

Goal and timeline

Before you decide to cash your paper savings bonds, consider why you’re doing it. Is it for a specific purchase, to consolidate assets, or simply to access funds? Your timeline is also crucial. Some savings bonds have minimum holding periods before they earn the best interest, and cashing them out too early might mean forfeiting some accrued earnings. For example, Series EE bonds generally need to be held for at least one year to earn interest.

Current cash flow

Assess your current financial situation. Do you have immediate cash needs, or is this a long-term investment you’re considering liquidating? Understanding your regular income and expenses will help you determine if cashing out the bonds is a necessity or a strategic financial move. If you have a robust emergency fund, you might have more flexibility in deciding when to redeem your bonds.

Emergency fund or safety buffer

Do you have a readily accessible emergency fund that covers 3-6 months of living expenses? If not, cashing in savings bonds might be a good opportunity to bolster this critical safety net. Having an emergency fund can prevent you from needing to tap into other investments or take on debt during unexpected events.

Debt and interest rates

Review any outstanding debts you have. If you have high-interest debt, such as credit card balances, using the proceeds from your savings bonds to pay them off could provide a guaranteed return that’s hard to beat. Compare the interest rate you’re earning on your savings bonds with the interest rate on your debts.

Credit impact

Cashing savings bonds generally does not directly impact your credit score. However, how you use the money afterward could. For instance, if you use the funds to pay down credit card debt, it can positively affect your credit utilization ratio and, subsequently, your score. Conversely, if you use the funds for speculative investments without proper research, it could lead to financial instability that indirectly impacts your credit.

Step-by-step (how to cash paper savings bonds)

1. Locate Your Bonds: Find all your paper savings bonds. This might involve checking safe deposit boxes, home safes, old filing cabinets, or asking family members if they are holding them for you.

• What “good” looks like: You have all your savings bonds in one place, clearly identifiable.
• Common mistake: Forgetting about bonds or not knowing where they are stored.
• How to avoid it: Create a detailed inventory of your financial assets, including where important documents like savings bonds are kept.

2. Verify Bond Details: Note the series (e.g., EE, I), issue date, and face value of each bond. This information is crucial for determining their value and redemption eligibility.

• What “good” looks like: You have a clear list of each bond’s series, issue date, and denomination.
• Common mistake: Not knowing the bond series or issue date, which are essential for calculations.
• How to avoid it: Carefully read the information printed on each bond certificate.

3. Check Maturity Status: Determine if your bonds have matured. Savings bonds earn interest for a specific period, usually 30 years. Cashing before maturity might mean losing some accrued interest, especially for newer bonds.

• What “good” looks like: You know the maturity date for each of your bonds and whether they are still earning interest.
• Common mistake: Cashing bonds that are still earning significant interest, thus forfeiting potential gains.
• How to avoid it: Use online savings bond calculators provided by the U.S. Treasury to determine the current value and maturity status.

4. Gather Identification: You will need valid, unexpired government-issued identification, such as a driver’s license, state ID, or passport.

• What “good” looks like: You have at least one form of primary identification ready.
• Common mistake: Bringing expired or insufficient identification.
• How to avoid it: Double-check the requirements of the institution where you plan to redeem the bonds and ensure your ID meets them.

5. Obtain Redemption Forms: For most redemptions at a bank, you’ll need to fill out a specific form, often FS Form 1522, “Application for Redemption of U.S. Savings Bonds.” Banks usually have these available.

• What “good” looks like: You have the correct redemption form and have begun filling it out accurately.
• Common mistake: Using the wrong form or filling out the form incorrectly, leading to delays.
• How to avoid it: Ask the bank teller for the specific form for cashing savings bonds and read the instructions carefully.

6. Visit a Financial Institution: Most banks and credit unions will redeem savings bonds for their customers. You’ll need to present your bonds, identification, and the completed redemption form.

• What “good” looks like: You are at a bank or credit union with all necessary documents.
• Common mistake: Going to an institution that doesn’t handle savings bond redemptions or to a branch that isn’t equipped for it.
• How to avoid it: Call ahead to confirm that the bank or credit union branch can process savings bond redemptions and what their specific procedures are.

7. Endorse the Bonds: You will need to sign the back of each savings bond in the presence of a bank official or authorized signatory.

• What “good” looks like: You have signed the bonds as instructed by the financial institution’s representative.
• Common mistake: Signing the bond before you are in front of the authorized person or signing it incorrectly.
• How to avoid it: Wait for the bank official to guide you on how and where to sign.

8. Receive Payment: The financial institution will verify the bonds and your identity, then issue payment. This is typically done via check or direct deposit.

• What “good” looks like: You have received your funds and a receipt for the transaction.
• Common mistake: Not understanding the payment method or timeline.
• How to avoid it: Clarify with the bank how and when you will receive your payment before you complete the transaction.

9. Consider Tax Implications: The interest earned on savings bonds is subject to federal income tax, but it is exempt from state and local income taxes.

• What “good” looks like: You understand that the interest is taxable at the federal level and have a plan for reporting it.
• Common mistake: Not accounting for the tax liability, leading to an unexpected tax bill.
• How to avoid it: Consult IRS Publication 550, “Investment Income and Expenses,” or a tax professional for guidance.

10. Handle Deceased Owner Bonds (if applicable): If the bond owner has passed away, you will need to provide a death certificate and proof of your right to inherit the bonds (e.g., will, trust document, or court order).

• What “good” looks like: You have gathered all necessary legal documents to prove your inheritance.
• Common mistake: Not having the correct documentation for transferring ownership or claiming the bond.
• How to avoid it: Contact the TreasuryDirect website or a qualified professional to understand the specific documentation required for your situation.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Cashing bonds before they mature fully	Loss of accrued interest and potentially lower overall return.	Wait until the bond has reached its full maturity period (usually 30 years) for maximum earnings.
Not checking if bonds are still earning	Forfeiting interest if the bond has stopped earning but hasn’t reached final maturity.	Use TreasuryDirect’s tools to check the current value and maturity status of each bond.
Using expired or incorrect identification	Inability to redeem the bonds at the financial institution.	Ensure all identification is current and matches your name exactly as it appears on the bonds.
Signing bonds before authorized personnel	Bonds may be considered invalid or tampered with, causing redemption issues.	Always sign the back of the bond only in the presence of a bank official or authorized agent.
Not understanding tax implications	Unexpected tax liability, potentially leading to penalties or interest.	Report interest earned on savings bonds as taxable income at the federal level. Consult a tax professional if unsure.
Going to the wrong financial institution	Wasted time and effort; inability to redeem the bonds.	Call ahead to confirm that the bank or credit union branch can process savings bond redemptions.
Mishandling bonds of a deceased owner	Delays in redemption, legal complications, or potential disputes.	Gather all required legal documentation (death certificate, will, etc.) and follow Treasury guidelines precisely.
Not keeping accurate records of bonds	Difficulty tracking value, maturity, and potential loss of bonds.	Create a detailed inventory of all savings bonds, including series, issue dates, face values, and where they are stored.
Relying solely on bank tellers for advice	Incomplete or inaccurate information, leading to errors or missed opportunities.	Supplement bank advice with official U.S. Treasury resources and consult a financial advisor or tax professional.
Not considering high-interest debt payoff	Missing out on a guaranteed, high return by not using bond proceeds to pay down debt.	Compare the interest rate on your savings bonds to the interest rate on your debts; prioritize paying off high-interest debt.

Decision rules (simple if/then)

• If your savings bonds are still earning interest and you don’t need the cash immediately, then hold onto them because they will continue to grow in value until maturity.
• If you have high-interest debt (like credit cards), then consider cashing your savings bonds to pay it off because the guaranteed savings from avoiding interest will likely outweigh the bond’s earnings.
• If the bond owner is deceased and you are the beneficiary, then gather the death certificate and proof of inheritance before visiting a financial institution because these documents are mandatory for redemption.
• If your savings bonds have reached their 30-year maturity limit, then cash them immediately because they will no longer earn any interest.
• If you need cash for an emergency and your emergency fund is insufficient, then cashing savings bonds can be a viable option because they are a liquid asset.
• If your savings bonds are Series EE and were issued within the last year, then avoid cashing them unless absolutely necessary because you will forfeit the first year’s interest.
• If you are unsure about the tax implications of cashing your bonds, then consult a tax professional because the interest earned is taxable at the federal level.
• If your local bank or credit union cannot redeem your bonds, then consider visiting a Federal Reserve Bank or contacting TreasuryDirect for alternative redemption options.
• If you have a significant number of bonds or complex inheritance situations, then seek advice from a financial advisor or estate attorney because they can help navigate the process smoothly.
• If your goal is to save for retirement and the bonds are still earning well, then consider reinvesting the proceeds into a retirement account if you have the option, or simply letting them continue to grow.
• If you are a minor and the bonds are in your name, then a parent or legal guardian will need to act on your behalf, providing necessary documentation to the financial institution.

FAQ

How do I know if my paper savings bonds are still earning interest?

You can determine if your bonds are still earning interest by checking their issue date and the bond series. Most savings bonds earn interest for 30 years from their issue date. The U.S. Treasury offers tools on its website to help you calculate the current value and maturity status of your bonds.

Can I cash savings bonds at any bank?

Most major banks and credit unions will redeem U.S. savings bonds for their customers. However, it’s always a good idea to call ahead to confirm that the specific branch can process savings bond redemptions and to inquire about any specific requirements they might have.

What identification do I need to cash a savings bond?

You will typically need valid, unexpired government-issued identification, such as a driver’s license, state ID card, or passport. The name on your identification must match the name on the savings bond.

What happens if the person named on the bond is deceased?

If the bond owner has passed away, you will need to provide a certified copy of the death certificate. You will also need documentation proving your legal right to the bond, such as a will, trust document, or court order showing you are the beneficiary or executor.

Is the interest from savings bonds taxable?

Yes, the interest earned on U.S. savings bonds is subject to federal income tax. However, it is exempt from state and local income taxes. You will need to report the interest when you file your federal tax return.

How long does it take to get paid after cashing a savings bond?

Once the redemption is processed at a bank, payment is usually issued immediately, either by check or direct deposit. If you are dealing directly with the Treasury for complex redemptions (like those for deceased owners), the process might take longer.

Can I cash savings bonds that are not yet mature?

Yes, you can cash savings bonds before they reach their full maturity, but there might be penalties. For example, Series EE bonds must be held for at least one year to earn any interest, and cashing them before five years may result in a penalty of the last three months’ interest.

What should I do if I lost my paper savings bonds?

If you’ve lost your paper savings bonds, you can request replacement bonds from the Bureau of the Fiscal Service. You’ll need to provide as much information as possible about the lost bonds, such as their serial numbers, issue dates, and face values.

What this page does NOT cover (and where to go next)

• Detailed tax advice: This page provides general information on taxability. For specific tax situations, consult a qualified tax professional or the IRS.
• Inheritance laws and estate planning: While we touch on deceased owners, complex estate matters or legal disputes require consultation with an attorney specializing in estate law.
• Investment strategies: This guide focuses on redeeming savings bonds. If you’re looking to invest the proceeds, explore resources on general investing principles and retirement planning.
• Digital savings bonds (TreasuryDirect): This article is specific to paper savings bonds. For information on managing bonds purchased electronically, refer to the TreasuryDirect website.