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The rate of growth in the value of a Series EE savings bond is based on the interest rate the bond is earning. Bonds sold since May 2005 earn a fixed rate until a bond is redeemed. The U.S. Treasury guarantees a bond will double in value no later than 20 years after the bond is purchased. For paper bonds, this means a bond reaches its face amount in a maximum of 20 years.
Series EE bonds accrue interest every month and compound every six months. A bond has a redemption value based on the amount of interest it has earned and any redemption penalties. An EE bond cannot be redeemed for at least 12 months after it is purchased. If a savings bond is redeemed within the first five years after purchase, a penalty of three months interest is subtracted from the redemption amount.
A Series EE savings bond continues to earn interest for up to 30 years if it is not redeemed. Even after a bond reaches its face
amount at the 20 year point, interest is still credited to the value. Savings bonds older than 30 years should be redeemed as they are no longer earning interest.
Series EE bonds issued before June 2003 have a different maturity date or age at which they reach the face value for paper bonds. This is a doubling of the original investment amount. The maturity ages for bonds issued between May 1995 and May 2003 is 17 years. The maturity for bonds issued from March 1993 until April 1994 is 18 years. Bonds issued between November 1986 and February 1993 matured in 12 years.
Savings bonds issued when rates are low, as they were in 2008 through 2010, will not earn enough interest to double in value and reach the bond's face amount within the 20 year guarantee. For these bonds, the Treasury will make a one-time adjustment to a bond's value on the 20-year anniversary to bring the current value up to the maturity amount. The bond will continue earning interest from that point at the original rate.
Category: Personal Finance