Looking to learn more about Patriot Bonds? Let’s start with a quick explainer of what savings bonds are. They’re low-risk investments that are backed by the U.S. government. After you purchase the bond, they pay you back the principal plus interest.
Savings bonds come in a number of shapes and sizes, with some earning interest differently than others. Series EE savings bonds, which have a fixed rate of return, are available online from the U.S. Department of the Treasury via TreasuryDirect.gov.
If you hold onto a Series EE bond for 20 years, it’s guaranteed to double in value. Ken Tumin, founder of DepositAccounts, says that’s an annual rate of return of about 3.5% — not too shabby considering that the current 30-year treasury yield is around 3%. Series EE bonds reach maturity and stop earning interest after 30 years.
Series I bonds are a little different. (More on this in a bit.) So where do Patriot Bonds come into play? We’ll explain.
What is a Patriot Bond?
Patriot Bonds are essentially Series EE bonds, but in paper form. They were created in response to the 9/11 attacks to raise funds to support anti-terrorism efforts. (All proceeds were deposited into a fund earmarked for this cause.) They were issued from December 2001 to December 2011, but have since been discontinued.
While Patriot Bonds are no longer being issued (Series EE bonds are now only available in electronic form), many people have yet to redeem them — and are trying to determine the best time to cash them in.
When can I redeem my Patriot Bond?
Technically speaking, you can redeem a Patriot Bond whenever you like, but timing does matter when it comes to getting the most out of your investment. Since it’s an EE bond, it’s guaranteed to double in value after 20 years — and if your bond was issued in 2001, you’re getting pretty close to the finish line — but you’ll get an even better return if you can hold out 10 more years.
“At 30 years, it reaches its full maturity and stops earning interest, and if you haven’t paid any taxes, you actually owe taxes then too,” said Tumin. “So it makes very much sense to redeem them at 30 years and not wait any longer because there’s no extra value of waiting.”
Taxpayers aren’t required to report the interest earned on a Series EE bond until they either redeem it or reach the 30-year mark — whichever comes first. The upside is that both Series EE and Series I savings bonds are only taxed federally, so you’re off the hook for state and local taxes. If you meet specific education requirements, you may be able to reduce your tax burden even more.
Taxes aside, Series EE bonds and Series I bonds can’t be redeemed within the first 12 months of issuance, and there are penalties for cashing them in prior to the five-year mark. However, both are moot points, since the youngest Patriot Bond is seven years old by now.
How do I redeem my bond and can I take it all?
The easiest and fastest way to redeem a Patriot Bond is at a local financial institution. Most can handle the job, though each bank has different policies regarding how much you can redeem per transaction. You can also convert paper Patriot Bonds to electronic bonds and cash them in at your convenience. These funds can be deposited into a specified checking or savings account.
Going the electronic route also means you can redeem as much or as little as you like, as long it exceeds $25 and you leave a minimum of $25 in your account. Just keep in mind that if you take a partial redemption, you’ll only be paid interest on the amount you redeem.
‘I have a Series I savings bond. Do I cash this in differently?’
Series I savings bonds are not guaranteed to double after 20 years, and they earn interest a little differently than Series EE bonds. They actually come with a fixed interest rate and an inflation rate.
“When you purchase an I bond, the fixed rate will remain the same throughout the life of the bond until you redeem it or until it matures,” said Tumin. “The inflation rate will change every six months. The treasury announces new inflation rates every May 1 and November 1.”
Still, when it comes to redeeming them, they’re not all that different from Series EE bonds. Most local financial institutions can process paper I bonds; alternatively, you can mail them in. Electronic I bonds can also be redeemed directly through TreasuryDirect. However, you aren’t able to cash them in within 12 months of issuance. In addition, if you redeem them before five years have passed, the final three months of interest will be withheld. (Savings bonds are designed to be long-term investments; the penalty is meant to deter people from redeeming them early.)
Find out how much your Patriot Bond is worth
If you’ve converted your Patriot Bond to an electronic bond, the current value should be available in your account. You can also use this TreasuryDirect online calculator to determine how much your paper savings bond is worth. But make sure you keep note of the following when calculating the value of EE bonds issued between May 1997 and April 2005: these bonds were assigned a variable interest rate — not a fixed one — that changed twice a year.
Once you’ve determined the value of your Patriot Bond, take a big-picture look at your investment portfolio to decide the best time to redeem it.