Savings Bond (Series EE)
A Series EE Savings Bond is a non-marketable, low-risk U.S. government savings instrument issued at face value that accrues interest at a fixed rate set at purchase, and is guaranteed by the U.S. Treasury to double in value within 20 years if held to that threshold, after which it continues earning interest for an additional 10 years.
Series EE Savings Bonds are issued exclusively through TreasuryDirect in electronic form, having replaced paper bond issuance through financial institutions in January 2012. They are purchased at face value — a $100 bond costs $100 — and earn a fixed interest rate announced by the Treasury each May 1 and November 1. Interest accrues monthly and compounds semi-annually, credited to the bond's value rather than paid out as current income.
The defining feature of Series EE bonds is the U.S. Treasury's guarantee that the bond will be worth at least twice its original purchase price if held for 20 years. If the fixed rate applied to the bond over 20 years does not naturally produce a doubling, the Treasury makes a one-time adjustment at the 20-year mark to bring the value to exactly double the original face amount. This guarantee effectively sets a minimum return floor equivalent to approximately 3.53% compounded annually over the 20-year holding period, regardless of the stated fixed coupon.
After the 20-year mark, Series EE bonds continue earning interest at their original fixed rate for an additional 10 years, giving them a maximum total term of 30 years from issuance. Bonds that have reached final maturity stop earning interest and should be redeemed promptly.
Series EE bonds cannot be redeemed within the first 12 months of purchase. Redemptions between 12 months and five years of purchase incur a penalty equal to the three most recent months of accrued interest. After five years, bonds can be redeemed without penalty.
A significant tax advantage of Series EE bonds is federal income tax deferral. The accrued interest is not subject to federal income tax until the bond is redeemed or reaches final maturity, allowing interest to compound on a pre-tax basis. Additionally, interest is exempt from state and local income taxes. For qualified educational expenses under the Education Savings Bond Program, interest may be partially or fully excluded from federal income tax if income conditions are met in the year of redemption — a benefit that should be assessed carefully based on individual circumstances.
Series EE bonds are particularly well suited for long-term savers who can commit to the 20-year holding period to capture the doubling guarantee, making them a distinctive niche among U.S. savings products that combines federal credit safety, tax deferral, and a guaranteed minimum return.