Paper savings bonds have three different maturity terms; original, extended and final. Here is what they mean and why they matter:
1. Original Maturity
Original maturity means when a savings bond will reach the face value found on the front of the paper bond. Original maturity = face value.
2. Extended Maturity
Extended maturity is the period of time between when the bond reaches its face value (amount printed on the front of the paper bond) and when the bond stops earning interest altogether.
3. Final Maturity
Final maturity is when a bond stops earning interest. Most bonds will earn interest for 30 years from the issue date.
Some E bonds earned interest for 40 years. All E bonds have stopped earning interest and should be redeemed.
Use a complimentary savings bond calculator for paper bonds to determine exact cash in amounts and the total amount of interest that will need to be reported in the year the bond(s) are redeemed. If you have bonds that have not reached final maturity, check the interest rate to see how they are performing. If the bonds are “active” (still earning interest), consider signing up for a Savings Bond Membership program so you can review your portfolio at any time, and receive monthly email updates which will include 3 month advanced alerts when your bonds will reach their final maturity and stop earning interest, so you can cash them in.
Bonds Are Not Created Equal
- Interest rates and the formulas each bond follows is determined at the time of issuance.
- Interest rates (closely tied to financial markets at the time) play a big part of how quickly a bond will reach its face value.
- If interest rates were high at the time of issuance, bond will reach its face value quicker.
- Once a bond goes into extended maturity it may have different rules, rates, and formulas.
- Some E bonds were purchased for 75% of their face value, meaning a $100 bond costs $75.00.
- Paper EE was issued at 50% of face value, meaning a $100 bond costs $50.00.
- E bond will usually reach face value a lot quicker, as more money was initially paid for it.
- Some bonds had a guaranteed interest rate, while others have variable rates which can fluctuate.
- Series I Bonds have a combination of a fixed rate (which remains the same for the life of the bond) and a variable rate (which can change every six months).
- Electronic bonds for both Series EE and I are purchased at face value.
Paper Versus Electronic Maturities
When a paper bond reaches final maturity it is not automatically redeemed (and a 1099-INT is not automatically issued).
When an electronic bond reaches final maturity, it is automatically redeemed and a 1099-INT is issued to the government. It is up to the bond owner to remember to print out the 1099-INT from their Treasury Direct account and include that amount on their Federal Income Tax Return in the year it is (automatically) redeemed.
The EE Maturity Guarantee
- The Treasury Department guarantees that Series EE Savings Bonds will double in value within 20 years from the issue date.
- IF a PAPER bond (issued at 50% of face value) has not reached it’s face value after 20 years, the Treasury will make a one-time adjustment so that the bond is worth its face value.
- For electronic EE bonds (issued since 2003) which are purchased at face value, the Treasury guarantees that the bond will double in value in 20 years.
- Click on the original maturity chart to learn the original maturity terms for some older paper bonds.
Bond Calculators Simplify It For You
Most investors are confused about bond maturities. Use a complimentary saving bond calculator which will simplify the process. The calculator (which includes a complimentary Bond Inventory Report) provides current cash in values, current interest rates and helpful maturity and taxation dates and amounts along with a “what this means to you” explanation. You can also print out the (complimentary) Bond Inventory Report to use as a great verification report when redeeming bonds at the bank.
If you plan on holding onto the bonds, there is a simple and easy way to track your investments using a bond management service, such as SavingsBonds.com’s Membership service. The service delivers monthly electronic summary Savings Bond Statements which includes current redemption values, investment growth, and up to 3-month advanced alerts when your bonds will reach final maturity, and even indicates the total interest earned amounts, which will be issued on a 1099-INT, should you redeem those bonds. The Bond Statements also include links to detailed Bond Inventory Report with bond-by-bond details.
By: Jackie Brahney, Marketing Director, SavingsBonds.com, firstname.lastname@example.org, www.SavingsBonds.com