What to Do with Series EE Savings Bonds?

Dear Dr. Don,

I own some Series EE savings bonds purchased in 1994. Should I cash these in or save them? And when do they mature? Thanks.

-- Linda Longbond

Dear Linda, Savings bonds issued between March 1993 and April 1995 had an original maturity period of 18 years. But they don't reach final maturity until they've been outstanding for 30 years, so yours will mature in 2024.

The savings bonds you purchased in 1994 earn a 4% yield. That yield could change, but it's unlikely. While they're eligible for market-based rates, it's likely they'll stick to the guaranteed minimum annual yield of 4% compounded semiannually.

If you don't need the cash, I'd recommend holding on to the savings bonds. Where else in the market can you get a guaranteed yield of 4% in a risk-free investment?

Also, please note that if you haven't been paying taxes annually on the interest income, you'll owe taxes on the entire interest earnings when the bonds are cashed in or mature. You can change over to annual reporting of the interest earnings if that makes more sense to you. Talk to your tax professional if you're not sure about it.

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