Banking 101: War Bonds - They May Be Worth More Than You Think

War bonds, a government-backed financial tool that dates back more than a century, offer a unique combination of investment and patriotism. Over the years, the U.S. government has periodically sold bonds to raise money to cover the costs of war. In exchange, buyers can invest in their country and get a good market return on their savings.

War bonds typically are kept for many years, and some can be worth significantly more than their face value when they are redeemed. The U.S. Department of the Treasury provides an online calculator that will tell you the bond’s value and will store your information so that you can easily recalculate it in the future.

What is a war bond?

The concept of war bonds was born in the United States leading up to World War I, when the U.S. government needed money to pay for its potential involvement in the conflict. In April of 1917, Congress passed the First Liberty Bond Act, and soon after the U.S. Treasury began issuing war bonds. The government funded American involvement in WWI through taxation and borrowing from the American people, and it ran several highly successful campaigns selling bonds to the public. Posters and other advertisements encouraged all Americans to buy Liberty Bonds as a patriotic act, and those who did so received red, white, and blue buttons declaring “I Own A Liberty Bond.”

The U.S. government issued a new series of war bonds in 1941, when the E bond series was introduced to help fund World War II. Everyone from Hollywood stars to bankers promoted the program, which tens of millions of families bought into over six decades. After initially helping with war funding, E bonds were issued as savings bonds for many more years. The series originally was issued for a fixed term of 10 years, but with extensions some bonds earned interest for as long as 40 years. No E bonds earned interest after 2010.

While nationwide war bond campaigns are no longer as vigorous as those during the world conflicts, the U.S. government continues to sell bonds to pay for wars. Now, Series EE bonds, which the Department of the Treasury first issued in 1980 and then reissued as the Series EE Patriot Bond three months after Sept. 11, 2001, help pay for the U.S. government’s ongoing fight against global terrorism.

What are my war bonds worth?

Check out the Treasury Department’s online calculator to find the bond’s value.

While the tool will store your information so that you can easily recalculate it in the future, you can’t use the site to check if you own war bonds or to purchase bonds.

The U.S. Treasury warns users to beware of scam websites that look like the Treasury’s calculator but ask you to enter your birth certificate number to find out whether you own bonds. They are fraudulent, as the online calculator is designed to only provide the value of your bond.

To find the value of your war bond, you will need:

• The bond’s series (E, EE, I, Savings Notes)
• The bond’s denomination ($10, $25, $50, $75, $100, $200, $500, $1,000, $5,000, or $10,000)
• The bond’s serial number (found in the lower right corner)
• The bond’s issue date (found in the upper right corner; enter two-digit month and four-digit year)

Once you enter this information, click on “calculate.” The tool will show you the bond’s current value, when the bond will mature and stop accruing interest, and the bond’s interest rate.

It’s important to note that when you redeem your bond, you might have to pay taxes on it. Interest on war bonds is subject to federal income tax, and, when applicable, federal estate, gift, and excise taxes, in addition to state estate and inheritance taxes. If you use bond proceeds to pay for higher education, however, you may can avoid paying taxes on the interest.

How do I redeem war bonds?

Series E and EE bonds can be redeemed 12 months after they are issued, but you’ll get the most money out of them if you wait a few years. You’ll lose the last three months of interest if you redeem an EE bond before you’ve held it for five years; otherwise, the bond will earn interest for as long as 30 years. The U.S. Department of the Treasury does offer some special provisions for cashing in bonds if you have been affected by a natural disaster.

If you have an old bond and it has stopped earning interest, you need to redeem it.

Here’s what to do:

Electronic war bonds

For bonds issued through TreasuryDirect, the U.S. Department of the Treasury’s online system, consumers can redeem a minimum of $25. If you choose to redeem only a portion of your bond amount, you must leave at least $25 in your TreasuryDirect account. All partial redemptions include principal and interest.

You’ll find instructions for redeeming your bonds when you log in to your TreasuryDirect account. The U.S. Treasury will credit your savings or checking account with the amount you redeem within two business days.

Paper bonds

The quickest and easiest way to cash in paper Series E and EE bonds is to take them to a local bank branch. Not all banks redeem bonds, however, and those that do may have slightly different processes so you’ll need to do some research first. You’ll also need to find out if the bank has a dollar limit on how much you can redeem and what kind of identification and other documents you’ll need.

Unlike electronic bonds, paper bonds must be redeemed in full.

If take your war bonds to your bank, you may only need proper identification such as a valid driver’s license and an account that’s been open at least six months. Some banks may limit how much non-customers can cash in (it’s typically less than $1,000).

You can also redeem your war bonds by mail. You’ll first need to have a certifying officer at your bank certify your signature in the “request for payment”on the backs of your bonds. Then, send your bonds, your social security number, and your direct-deposit information on FS Form 5396 to:

Treasury Retail Securities Services
PO Box 214
Minneapolis, MN 55480-0214.

The U.S. Treasury will only redeem bonds to the people listed as owner or co-owner on the bond. War bonds cannot be transferred, which means you cannot redeem bonds issued to other people that you find or purchase from an online auction site. One exception is bonds that you inherit, and the U.S. Department of the Treasury has a procedure for redeeming bonds in this circumstance.

Conclusion on war bonds

War bonds are a good way to save if you can afford to put them away for years — even decades — while they build interest. They will be steady interest earners, and you may be pleasantly surprised when you redeem them at the amount they are worth.