You have savings bonds from the ’90s. What should you do with them?

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Listener Amy Lytle from Greensboro, North Carolina, asks: 

We received a $100 bond as a wedding gift. I’ve never understood how to go about “redeeming” it. We basically stuck it in a safety deposit box and forgot about it. Next month, we’ll be celebrating our 25th wedding anniversary. Can we still redeem this bond? Do we do so at today’s current (inverted) rates or at the rate at the date of purchase or at the rate ten years from the date of purchase? Should we just continue to hang onto it? Will this actually be worth more than the $100 that was used to purchase it in 1999?

If you received a savings bond as a gift, you’ll get paid regular interest depending on the type of bond that it is until it matures. But keep track of its lifespan, because holding onto a bond past its maturity date can lessen its value thanks to inflation. 

The U.S. Treasury offers series EE bonds, which are guaranteed to double in 20 years, offer monthly interest and currently earn a fixed interest rate that will remain the same throughout their first 20 years. 

You’ll have to read the fine print, because the U.S. Treasury’s rules have changed over the years, depending on when the bond was issued. If EE bonds were purchased between 1997 and 2005, you earn a variable rate of interest that can change every six months. 

Bonds purchased between 1997 and 2003 had an original maturity timeline of 17 years after the date they were issued, meaning they would be worth at least double after 17 years. But these bonds, whether you were gifted them in 1999 or 2019, will continue earning regular interest until the bond reaches 30 years old. 

You might also have a series I bond, which is designed to protect against inflation. These have a maturity of 30 years and pay you an interest rate that is a combination of a variable rate that can change every six months and a fixed rate that remains the same throughout the bond’s life. The bond’s interest rate will never fall below zero, according to the Treasury’s Bureau of the Fiscal Service.  

You can cash in EE or I savings bonds anytime after one year, but if you cash them in before five years, you lose the last three months of interest. 

You could also still be holding onto older securities that are no longer issued, like HH bonds, which earned interest for up to 20 years. 

When in doubt, you can use TreasuryDirect’s paper savings bond calculator to figure out what your bond’s current value is. You’ll need to input the series it’s from, the bond serial number, the issue date and the denomination.  

You can still redeem these bonds anytime past their maturation date, but you shouldn’t wait, since inflation can erode their value. For example, let’s say you have a savings bond that’s fully matured and is worth $1,600. In 10 years, any of the goods and services you would have bought today are now worth $2,050, meaning you’ve lost $450, the Bureau of the Fiscal Service explains on their website.

As of last month, people were holding onto 96 million matured, unredeemed savings bonds. All these investors have basically given the government their money, interest-free. 

You can redeem your paper Treasury bond through a local commercial bank or broker, or send it to the Bureau of the Fiscal Service, said Barbara O’Neill, a professor emerita at Rutgers University and author of the book “Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life.” 

However, some people have reported issues with redeeming these bonds. The bank you try to cash them at has to wait for the Treasury to pay them. That means the bank is basically fronting you money, said New York Times reporter Rob Copeland in an interview with Marketplace’s Kai Ryssdal. 

“Then they have to chase after the government,” said Copeland, who wrote about this issue for the New York Times. 

Copeland had difficulty redeeming his bonds at multiple financial institutions, including the New York Times credit union and J.P. Morgan Chase. But after his article came out, Copeland went to a Chase bank and was able to redeem his bonds seamlessly.

Because your savings bonds’ interest is taxed, you may want to redeem them strategically so that you won’t have to pay taxes on all of them all at once. O’Neill said she has about a dozen bonds from the early 2000s, and plans to redeem one a year, starting next year, even though they won’t mature for a while. 

“Everybody just holds them for up to 30 years, and then cashes them in. That could be a substantial amount of interest,” O’Neill said. 

Because Treasury securities are federal debt, you only pay federal taxes on them, and they’re taxed as ordinary income, O’Neill explained.

There are other reasons why you may want to consider redeeming your bonds before they reach maturity. One would be if you need to fund a financial goal, O’Neill said. For example, if you need to pay for your child’s education in 20 years, that might be the ideal time to cash out, she said.

You might also need the money for living expenses in retirement or family emergencies that require quick cash, she added.

O’Neill recommends keeping a list of when your bonds mature, storing your bonds in a safe place, and going onto TreasuryDirect every once in a while to see the current value of your bonds.