Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.
Savings bonds are low-risk investments backed by the U.S. government. After you purchase the bond, you’ll get back the principal, plus interest.
Several types of savings bonds exist, and not all earn interest the same way. For example, Patriot Bonds, which are classified as Series EE bonds, are guaranteed to double in value after 20 years, provided they were purchased in June 2003 or later. Ken Tumin, founder of DepositAccounts, said that’s an annual rate of return of about 3.5% — not too shabby considering that the current 30-year treasury yield was just over 2.2% in November 2019.
But what are Patriot Bonds, exactly? Here’s everything you need to know, from how to cash a Patriot Bond to whether it’s possible to get your money early.
What’s a Patriot Bond?
Patriot Bonds were created in response to the 9/11 attacks as a way to raise money for anti-terrorism efforts. The bonds were issued from December 2001 to December 2011 and then discontinued.
Patriot bonds function identically to paper Series EE bonds, although they’re distinguished by the words "Patriot Bond" printed at the top of the certificate. The bonds could be purchased in amounts ranging from $25 up to $30,000.
Interest rates for those bonds will depend on when you purchased them. Series EE bonds purchased between May 1997 and April 2005 earn interest at a variable rate; those purchased in May 2005 and after earn interest at a fixed interest rate.
How to cash a Patriot Bond
Although Patriot Bonds no longer are issued, many people haven’t cashed them in and are trying to determine the best time to do so.
All Series EE bonds, including Patriot Bonds, reach full maturity and stop earning interest after 30 years. That means you’ll want to cash your Patriot Bonds sometime between when you purchased them and when they reach full maturity.
Because Patriot Bonds are paper investments, you can redeem them at your local bank. (Series EE bonds now are available only in electronic form.) It’s a straightforward process, and you’ll get your money right away. Just make sure to bring proof of identity. If you redeem bonds for someone who passed away, you’ll have to bring a certified death certificate.
Can I cash a Patriot Bond early?
Technically speaking, you can redeem a Patriot Bond whenever you like, but timing matters when it comes to getting the most out of your investment.
Patriot Bonds purchased in June 2003 or after are guaranteed to double in value in 20 years, but those purchased before June 2003 will double in 17 years instead. That said, you’ll get an even better return if you hold out until they fully mature. This is because Series EE bonds earn interest for 30 years, so you’ll continue to gain value long after your Patriot Bonds double.
It also is worth looking at the interest rates for your specific bond — which, again, depends on when you purchased it — to determine whether it’s worthwhile to redeem it before the 30-year full maturity. However, you won’t want to wait any longer than 30 years to redeem your bond.
“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,” Tumin said. “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 redeem it or the bond matures, whichever comes first. The upside is that Series EE and Series I savings bonds (another type of federal bond) are taxed only federally, so you’re off the hook for state and local taxes. If you meet specific education requirements, you might 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’s a penalty for cashing them in prior to the five-year mark. However, both are moot if you haven’t redeemed your Patriot Bonds, because the youngest Patriot Bond is 8 years old by now.
How do I redeem my bond, and can I take it all?
Again, the easiest and fastest way to redeem a Patriot Bond is at your local financial institution. But you can 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 as 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 be paid interest only on the amount you redeem.
I have a Series I savings bond. What about those?
Series I savings bonds aren’t guaranteed to double in value after 20 years, and they earn interest a little differently. Unlike many types of Series EE bonds — particularly those sold from May 1997 to April 2005, which have a variable interest rate — all Series I bonds have 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,” Tumin said. “The inflation rate will change every six months. The Treasury announces new inflation rates every May 1 and Nov. 1.”
Still, when it comes to redeeming them, Series I bonds aren’t that different from Series EE bonds. Most financial institutions can process paper bonds, and you can mail them in. Electronic Series I bonds also can be redeemed directly through TreasuryDirect.
However, as with Series EE bonds, you can’t cash in Series I bonds within 12 months of issuance. In addition, if you redeem them before five years pass, the final three months of interest will be withheld. That’s because 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 converted your Patriot Bond to an electronic bond, the current value should be available in your account. You also can use this TreasuryDirect online calculator to determine how much your paper savings bond is worth.
After you determine the value of your Patriot Bond, take a look at your overall investment portfolio to decide the best time to redeem it.
How much is a $50 Patriot Bond worth?
The value of your bond obviously depends on when you purchased it, but here are a few examples. A $50 Patriot Bond purchased in December 2001 would have cost $25, because those bonds were sold for half their noted value originally, and it would be worth $51.12 as of November 2019. That’s slightly more than double your original investment.
Meanwhile, a $50 Patriot Bond purchased in June 2005 — after the new interest-rate system for Series EE bonds began — would be worth $41.20 as of November 2019.
How much is a $100 Patriot Bond worth?
Again, a $100 Patriot Bond would have cost $50 in December 2001, and, as of November 2019, it would be worth $102.24.
To give a different example, say you purchased a $100 Patriot Bond on the later end of its availability, in November 2009. That bond would be worth only $56.40 in November 2019, because it wouldn’t reach full maturity until November 2039.
Ultimately, a lot of factors determine the best time to redeem your Patriot Bonds, including when you purchased the bond, when its value will doubles and, of course, your financial situation. After you know how much your bond is worth — and how to redeem it — you can make the best decision for yourself.