Series EE Bond

Updated on January 5, 2024
Article byHimani Bhatt
Reviewed byDheeraj Vaidya, CFA, FRM

What is a US Series EE Savings Bond?

Series EE Bond is a savings bond issued by the US Treasury that promises to at least double in value if held for two decades. These low-risk financial investments pay interest for 30 years or until encashed, whichever is early. The EE bonds are the best for those looking for long-term investments involving ultra-low risk.

Series EE Bond

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These savings bondsBondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain more have their coupon rates determined based on the percentage of the long-term Treasury rates. The rates, however, are decided at the time of bond issuance. The current interest rateInterest RateAn interest rate formula is used to calculate loan repayment amounts as well as interest earned on fixed deposits, mutual funds, and other investments. It is also used to calculate credit card more for the EE bond purchased from November 2021 through April 2022 is 0.10%.


Key Takeaways

  • Series EE Bond is a US government-backed savings bond that doubles in value after 20 years.
  • The interest on Series EE Bond is calculated monthly and compounded twice every year.
  • Series EE Bond requires an investment of at least $25 that extends to a limit of $10,000 per calendar year, including both bought and gifted bonds.
  • Investors cannot redeem their EE bond within the first year. They should have ownership of five years to claim the interest due without any penalty.
  • Paper versions of these savings bonds have been discontinued.

Series EE Bond Explained

Series EE bond is a government-guaranteed product issued by the US Treasury, along with the I bond, which earns interest for a lifetime without getting affected by market fluctuations. It acts as a secure long-term investment that may be used to fund kids’ education, save for post-retirement, gift, or enjoy tax exemptionsTax ExemptionsTax-exempt refers to excluding an individual's or corporation's income, property or transaction from the tax liability imposed by the federal, local or state government. These exemptions either allow total relief from the taxes or provide reduced rates or charge tax on some items more.

It pays a fixed rate of interest for 30 years. The bond coupon ratesBond Coupon RatesThe coupon rate is the ROI (rate of interest) paid on the bond's face value by the bond's issuers. It determines the repayment amount made by GIS (guaranteed income security). Coupon Rate = Annualized Interest Payment / Par Value of Bond * 100%read more are determined at the issuance of the bond by considering market yields. The rate for new bonds is announced by the US treasury biannually, May 1 and November 1. This rate is applicable for bonds bought in the following six months.

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The interest on these bonds is calculated monthly and added to the bond. Then, the bond value is compounded twice every year. Note that the interest is disbursed upon cashing the bonds. Investors can hold them for 20 years to double their investment.

For example, a bond worth $50 would reach the value of $100 after 20 years. The Treasury will make up for any deficit or shortfall in value if redeemed after 20 years. But, if investors decide to sell the bond before that, they will receive the same interest rate as agreed at the time of purchase. As a result, these bonds are considered super safe options to invest in for guaranteed returns. 

However, investors cannot redeem their Series EE bonds within the first year. They should have ownership of five years to claim the interest due. If investors decide to sell the bond in those five years, they lose interest for three months.

Furthermore, investors are allowed to spend on a limited number of EE bonds each year, with the minimum price of the bondPrice Of The BondThe bond pricing formula calculates the present value of the probable future cash flows, which include coupon payments and the par value, which is the redemption amount at maturity. The yield to maturity (YTM) refers to the rate of interest used to discount future cash more to be invested in being $25 and the maximum annual purchase being $10,000. This number comprises both the purchased and gifted bonds with two exceptions:

  • The value of a bond transferred to an investor due to the actual owner’s demise doesn’t count toward the limit. 
  • The owner of a paper bond issued before 2008 may transform it into an electronic version, irrespective of the amount. 

Note that the sender must deliver the gifted bonds with a valid TreasuryDirect account only to the recipients. Or else, the investor can hold them in the Gift Box of their account. 

The Series EE bonds are sold at face value, i.e., you pay $500 for a $500 bond. These bonds cannot be purchased or sold in an open market, so they are classified as non-marketable financial vehicles. Plus, they remain exempt from all state and local income taxesIncome TaxesIncome tax is levied on the income earned by an entity in a financial year as per the norms prescribed in the income tax laws. It results in the outflow of cash as the liability of income tax is paid out through bank transfers to the income tax more, making it an effective investment option for investors paying high taxes.

The structure of Series EE bonds was quite different from the ones purchased from 1997 to 2005, earning a variable interest rateVariable Interest RateVariable interest rate refers to a mortgage or loan interest rate that fluctuates with the market conditions. The interest levied on variable loans depends on the reference or benchmark rate—an index. read more. The paper bonds (the earlier forms) were sold at half of their face value and reached full value at maturity. However, the electronic bonds purchased via TreasuryDirect were sold at face value.

Since January 1, 2012, paper versions of these savings bonds are no longer sold. The decision came following the Treasury’s attempt to enhance the number of electronic transactions in the country.

Who can Invest in a Series EE Bond?

The Series EE bond can be invested in by:

  • Individuals
  • Trusts
  • Estate
  • Corporations
  • Partnerships
  • Entities with a Social Security Number (SSN) or Employer Identification Number (EIN)

The registration procedure during the purchase ascertains who holds it and who can redeem it. It incorporates the owner’s name (individual or organization), SSN or EIN, and secondary owner or payee. 

Both adult individuals and minors with a valid SSN may invest in the EE bond. However, they must fulfill any one of these conditions, regardless of their present whereabouts. 

  1. US citizenship
  2. US residency
  3. Civilian employee status of the US

Note that minors can’t open the TreasuryDirect account or manage commercial affairs. Nevertheless, a parent or adult caretaker can open an account (linked to their own) and control business dealings on their behalf. 

Series EE Bond Calculations

Direct Method

To compute the interest on an Series EE bond: 

  1. Log in to your TreasuryDirect account with any web browser and check out the bond issuance date. 
  2. Visit to look for the annual interest rate. 
  3. Take the bond’s initial value into account and calculate its interest amount for the initial six months.
  4. Divide the annual interest rate in half and multiply it by the original bond value. 
  5. Add the result to the actual value of the bond to get the new bond value. 
  6. Then, interest for the next six months is calculated using the new bond value computed in Step 5. 

Thus, it equates to:

  • Interest for the first 6 months = [(Annual Interest Rate/2) x Original Bond Value]
  • New Bond Value (after 6 months) = Interest for the first 6 months + Original Bond Value
  • Interest for the next 6 months = New Bond Value after 6 months x (Annual Interest Rate/2)
  • New Bond Value (after 1 year) = Interest for the next 6 months + New Bond Value after 6 months

Compound Interest Formula

The bond value at the end of a specific time period can also be calculated using the compound interest formulaCompound Interest FormulaCompound interest is the addition of interest to the principal sum of a loan or deposit; rather than paying it out, it is the outcome of reinvesting interest so that interest in the next period is earned on the principal sum plus previously accumulated more.

Compound Interest Formula



Let’s understand this with an example. Suppose,

Series EE bond’s original value = $150

Annual interest rate = 2.56%

Using direct method

Interest for first 6 months = [(0.0256/2) x150] = (0.0128 x 150) = 1.92

New bond value (after 6 months) = 1.92 + 150 = 151.92

Interest for the next 6 months = (0.0256/2) x151.92 = 1.94

New Bond Value (after 1 year) = 1.94 + 151.92 = 153.86

Using compound interest formula

Here is the final value of the bond after one year.

final value of bond after one year

The final value of the bond after 20 years will be $249.48.

final value of bond after 20 years

How to Buy Series EE Bond?

Investors can buy electronic EE savings bonds via the TreasuryDirect portal. There, they can buy, value, and manage the bonds from the series along with other securities issued by the U.S. government. Note that paper bonds are no longer issued.

To open an account:

  1. Log in to TreasuryDirect.
  2. Select the account type.
  3. Enter the following information:
    • SSN or EIN
    • E-mail ID
    • Bank account details
  4. Choose
    • Password and its reminder
    • Security question
    • Caption

TreasuryDirect account number starts with a letter followed by nine digits. Ensure to use an updated web browser for security reasons.

Taxation Issues

The interest that EE bonds offer is subject to federal income taxFederal Income TaxFederal income tax is the tax system in the United States and is levied and governed by Internal Revenue Services (IRS). It helps determine the tax charged on the income earned by individuals, corporations, and various other legal more. Therefore, all federal taxes like income, estate, excise, gift tax, etc., apply to it, along with state estate and inheritance taxes. However, they are exempt from other state and municipal taxes.

Besides, interest rates might be excluded from federal income tax if the bonds are purchased for financing higher education. Investors can pay federal income tax on bond interest in three ways:

  • Annually
  • At Series EE bond maturity
  • When bonds are encashed 

The EE bonds are subject to payment of federal income tax irrespective of the owner’s identity. For example, if the bond is purchased as a gift, a gift tax applies. Also, if the bond is co-owned, each owner is responsible for paying the tax in equal halves.

Series EE Bond vs Series I Bond

The Similarities

  • The US government issues both.
  • Both earn interest for a lifetime without being affected by market fluctuations. 
  • Investors cannot redeem both within the first year. They should have ownership of five years to claim the interest due. If investors decide to sell the bond in those five years, they lose interest for three months. 
  • Both the options remain exempted from all state and local income taxes, making it an effective investment option for investors paying high income taxes.

The Differences

  • Series EE bonds pay the same interest rate for life, while I bonds have interests adjusted to help owners beat inflation.
  • Series EE bonds guarantee to double the investment in 20 years, while I bonds make no such promises.
  • Series EE bonds earn interest at a fixed rate, whereas I bonds use a composite rate comprising a fixed interest rate and a variable inflation rate.
  • Both bonds permit to buy only a maximum of $10,000 worth of electronic bonds, but I bonds allow to purchase $5000 of paper bonds too using tax refund.

Frequently Ask Questions (FAQs)

Q#1 – What is the Education Savings Bond Program?

A – While financing education, eligible taxpayers may exclude a part or all of the interest acquired from qualified Series EE bonds issued after 1989. The series EE bond must be published in the name of an adult individual at least 24 years old.

Q#2 – What happens if I cash my EE bond within the initial five years?

A – Cashing your bond during the first five years will make you lose the interest amount of the last three months. Suppose you buy a bond in March 2022 and cash it in July 2024 (28 months). You will procure the original amount with 25 months of interest (till April 2024). Note that you must hold at least 1-year of proprietorship before cashing the bond.

Q#3 – Is my investment secure?

A – Yes, your Series EE bond investment is fully secured. Both principal and interest amounts have got the complete support of the US Government. So, you can stay assured of getting the initial investment amount and the secured interest on time.

Q#4 – What is the difference between EE and I bonds?

A – Both EE and I bonds are low-risk savings bonds issued by the US government that earns interest for a lifetime. However, EE bonds pay a fixed interest rate for life, while I bonds have a fixed as well as an inflation-adjusted interest rate. Also, Series EE bond guarantees to multiply investment by twofold in 20 years, while I bonds make no such promises.

Recommended Articles

This has been a guide to Series EE Savings Bond (US). Here we explain Series EE Savings Bond, its maturity, & interest rate & calculate its value on cashing. You may learn more about financing from the following articles –

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