What is a Series EE bond?
The Series EE Bond is often called a “Patriot Bond, ” a non-marketable, interest-bearing U.S. government savings bond.” Over the average 20-year initial term, the value of these bonds is guaranteed to increase by at least twice. Certain Series E.E. bonds have 30-year total interest-paying lifetimes, longer than their initial maturity date. The percentage of the long-term Treasury rates is used to calculate the coupon rates for Series EE Bonds, which are announced at the time of issue.
How a Series EE Bond Works
The U.S. Treasury issues two savings bonds: the Series E.E. bond and the Series I bond. Series E.E. bonds are non-marketable securities that cannot be purchased or sold on the open market.
Semi-annual fixed coupon rates are applied to Series E.E. bonds issued after May 2005 on May 1 and November 1. All issuances will be subject to rates for the next six months. The value of bonds issued after each date increases monthly, although interest is paid every two years.
Series E.E. bonds are generally free from state and local taxes and are considered secure and low-risk investments. They are nevertheless liable for federal taxes, albeit only in the year of the bond’s redemption or maturity. U.S. citizens, legal residents, minors, and government workers in the United States may acquire EE Bonds regardless of citizenship status.
Particular Points to Remember
Following the terrorist events of September 11, 2001, paper E.E. bonds were reissued under the name “Patriot Bonds.” They are precisely the same as the paper Series EE Bonds, with the exception that if you acquire paper bonds from a financial institution after December 10, 2001, the words “Patriot Bond” will be written on the top half of the bond certificate, between the issuance date and the Social Security Number (SSN). Paper Patriot Bonds are no longer issued by financial institutions as Series E.E. bonds. However, they may still be redeemed or converted into electronic bonds.
Reissuing Series E.E. bonds to fix minor typographical mistakes in names, addresses, or Social Security numbers is unnecessary and optional.
Conditions for issuing Series EE Bonds
EE bonds have a $25 minimum investment requirement, and each investor is limited to $10,000 in bond purchases each calendar year. In addition, before redeeming the bonds, investors must hold onto their assets for at least twelve months. Bondholders who redeem their bonds before the fifth year will have three months’ interest payments deducted. E.E. bonds are worth more the longer they are kept since they may receive interest for up to 30 years.
The bonds acquired online via TreasuryDirect are purchased at face value, but the bonds printed on paper were issued at a 50% discount to par. The latter, which pay interest in the same manner as paper E.E. bonds, are nonetheless guaranteed to be worth double their initial value at the first maturity date after 20 years.
Conclusion
- Interest-bearing U.S. government savings bonds, or Series EE Bonds, have an initial 20-year term guarantee and are guaranteed to at least double in value.
- Certain Series E.E. bonds continue to pay interest for up to 30 years after they are issued, beyond the initial maturity date.
- E. bonds have a $25 minimum investment requirement.
- An investor may buy up to $10,000 of these bonds each calendar year.
