What It Costs to Cash a Savings Bond Early
Cashing an EE or I savings bond before it is 5 years old costs the last 3 months of interest. That is the only early-redemption charge, and it is smaller than most people expect: on a $1,000 EE bond at today's 2.40% rate, it is about $6. The bigger limit is the 12-month lock, since you cannot cash either bond at all during the first year.
1. The two rules
TreasuryDirect states both rules on its page for cashing EE and I bonds:
- You can get your cash for an EE or I bond any time after you have owned it for 1 year.
- If you cash the bond in less than 5 years, you lose the last 3 months of interest.
TreasuryDirect gives an example: if you cash in the bond after 18 months, you get the first 15 months of interest. After 5 years, the penalty is gone. TreasuryDirect also notes that the values shown in your account and in its Savings Bond Calculator for bonds under 5 years old already leave out those final three months, so the number you see is the number you would receive.
2. The cost in dollars
Assume a $1,000 electronic EE bond bought at 2.40%, the rate TreasuryDirect lists for EE bonds issued May 1, 2026 through October 31, 2026 (as of October 2026). Interest is added monthly, and every sixth month the rate is applied to a new, larger value, so the bond compounds semiannually. The table compares what the bond is "worth" with what you would receive.
| Cashed at | Full value | Value you receive (3 months dropped) | Interest lost |
|---|---|---|---|
| 12 months | $1,024.14 | $1,018.07 | $6.07 |
| 18 months | $1,036.43 | $1,030.29 | $6.14 |
| 24 months | $1,048.87 | $1,042.65 | $6.22 |
| 48 months | $1,100.13 | $1,093.61 | $6.52 |
| 60 months | $1,126.69 | $1,126.69 | $0.00 |
The method is an approximation of Treasury's calculation: it applies 0.2% per month (2.40% divided by 12) to the value at the start of the current six-month period. Your own bond's exact value is in your TreasuryDirect account or the Savings Bond Calculator.
Notice what the table shows. The penalty is about $6 per $1,000 and edges up slowly, because it is always three months of interest on a growing balance. Doing nothing for one more month after year 5 saves that whole amount.
3. Putting it as a yearly rate
Three months of interest on a bond earning 2.40% is about 0.6% of the balance. If you cash at 12 months, the effective rate you earned is 1.81% on the money for the year ($18.07 on $1,000), not 2.41%. Cashing at 48 months gives an average of about 2.26% a year on the $1,093.61 received, compared with about 2.41% a year on the full $1,100.13.
4. When early cashing can still make sense
The charge is small, so the real question is whether the bond is the best place for the money. Some points to weigh:
- A cash need. If you must use the money, 3 months of interest is a minor cost compared with borrowing.
- A higher-paying alternative. The new EE rate resets every May 1 and November 1. TreasuryDirect says the rate on an EE bond you already own is fixed for 20 years, so a lower rate stays lower even if new bonds pay more.
- The 20-year guarantee. TreasuryDirect guarantees that an EE bond is worth at least twice what you paid at 20 years. Cashing early gives up that guarantee.
5. Partial cashing for electronic bonds
Electronic bonds can be cashed in part: any amount of $25 or more to the penny, and you must leave at least $25 in your account. If you cash only part of a bond's value, you only receive the interest on the part you cash. Paper bonds cannot be cashed in part. They must be cashed for their entire value.
6. Practical details
- Cash electronic bonds in your TreasuryDirect account under ManageDirect, then Redeem securities.
- Paper bonds can be cashed at a bank (banks vary in whether they cash savings bonds and how much), or by sending FS Form 1522 and the bonds to Treasury. Signature certification is required if the value is more than $1,000.
- Do not buy savings bonds from someone else or on an online auction site, because you cannot cash them.
- The interest is taxable for federal income tax purposes in the year you receive it, unless you chose to report it earlier. The 1099-INT for an electronic bond appears in your account in January after the year you cash in.
7. Key takeaways
- You cannot cash an EE or I bond in the first 12 months.
- Between 12 months and 5 years, you lose the last 3 months of interest. After 5 years, there is no penalty.
- On a $1,000 EE bond at 2.40%, the lost interest is about $6.07 to $6.52, depending on when you cash.
- Cashing early also gives up the 20-year doubling guarantee on EE bonds.
- Electronic bonds can be cashed in part, from $25 up, leaving at least $25.