United States Savings Bonds series EE are popular investment tools that help many Americans achieve their financial goals. These bonds represent a loan made by the investor to the U.S. government. In return, the bondholder receives interest over a fixed period – typically 20 years, but they can continue earning interest for up to 30 years.
But what happens when you need to cash your EE savings bonds? Maybe you are planning a significant purchase or investment. Take, for example, buying property with no cash deposit. It can become a considerable challenge if you do not have ready cash at hand. But having mature EE bonds can give the necessary boost needed to make that singular investment.
Here is a step-by-step guide on how to cash in your EE Savings Bonds.
Step 1: Check the Maturity Dates
First, it’s essential to know that EE Savings Bonds cannot be cashed during their first year. They must be held for at least 12 months. They also reach their full face value after 20 years. If you cash them out before this 20-year period, you might earn less than their face value. Therefore, it’s recommended to check your bonds’ issue dates —and thus their maturity dates— before taking further steps.
Step 2: Decide How Much To Cash
Next, decide how much of your EE Savings Bonds you want to cash. If you only need a little amount, it might be more beneficial to cash just that needs to be extracted, allowing the rest to continue earning more interest.
Step 3: Choose Where To Cash Them
After that, choose where you want to cash your bonds. Financial institutions like banks and credit unions are the most common places where you can cash Series EE bonds. Keep in mind that some banks may require you to be an account holder for a specific time before cashing your savings bonds.
Step 4: Verify Your Identity
When you are ready to cash your bonds, you will need to verify your identity. This proves that you are the rightful owner of the savings bonds. You may need to show a valid identity card like a driver’s license or passport.
Step 5: Pay Taxes
The last step when cashing your EE Savings Bonds is to pay taxes. Interest earned on savings bonds is subject to federal tax but exempt from state and local income taxes. You will receive a 1099-INT form at the end of the tax year which shows the interest you earned from cashing your bonds.
Cashing in your EE Savings Bonds does not have to be a complicated process. By following these steps, you can smoothly convert your savings bonds into the cash you need for significant life investments such as buying property with no cash deposit. Always remember to assess your specific situation and consult with a financial advisor as needed.