2025 U.S. Savings Bonds: Series EE vs. Series I – Rates, Features & What to Know

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Since 1935, the U.S. Treasury has offered savings bonds to encourage Americans to save while supporting government funding. Today, savings bonds are issued electronically, reflecting modern financial trends and convenience.

Currently, two primary types of savings bonds are available: Series EE and Series I. Series EE bonds feature a fixed interest rate and a government-backed promise to double in value within 20 years. On the other hand, Series I bonds combine a fixed rate with a variable inflation-adjusted rate, protecting your investment against rising costs.

Essential Highlights

• Series EE bonds provide a fixed interest rate with a 20-year value doubling guarantee.
• Series I bonds offer a fixed rate plus an inflation-indexed variable rate, without a doubling guarantee.
• Both bond types have a 30-year maturity period.
• Interest income from these bonds is exempt from state and local taxes, with potential federal tax benefits for educational expenses.

Understanding Series EE Bonds in 2024

Series EE bonds are the successors to the historic Series E War Bonds, which helped finance WWII. These bonds can be purchased electronically starting at $25, with increments as precise as pennies, allowing flexible investment amounts up to $10,000 annually per individual.

Guaranteed Doubling and Redemption Rules

The U.S. government guarantees that Series EE bonds will at least double their face value after 20 years. Although the bonds mature in 30 years, investors can redeem them after one year, but redeeming before five years results in a three-month interest penalty. The minimum redemption amount is $25.

Fixed Interest Rate Details

Series EE bonds have a fixed interest rate set at issuance and updated biannually in May and November for new bonds. For example, bonds issued during the six months ending April 2020 carried a 0.10% rate. If the bond’s compounded interest doesn’t double its value by 20 years, the Treasury makes up the shortfall.

Interest earned is exempt from state and local taxes but subject to federal tax unless used for qualified higher education expenses.

Note on Pre-2003 Bonds

Bonds issued before June 2003 were purchased at half face value and mature to full face value over 20 years, with interest calculated on the purchase price rather than face value.

Insights into Series I Bonds in 2024

Introduced in 1998, Series I bonds are designed to protect investors from inflation. They carry a fixed rate plus a semiannual inflation-adjusted rate based on the Consumer Price Index for All Urban Consumers (CPI-U). For instance, bonds bought in the six months ending October 2021 offered a combined interest rate of 3.54%.

Purchasing and Redemption Options

Series I bonds can be directly purchased from the Treasury or through tax refunds. Unlike Series EE, paper certificates are rare. Early redemption is allowed after one year with a three-month interest penalty if redeemed within five years.

Distinct Advantages of Series I Bonds

Series I bonds do not guarantee doubling but provide inflation protection, which can be crucial during periods of rising prices. Additionally, when used for qualified higher education expenses and redeemed in the same tax year, interest may be exempt from federal, state, and local taxes.

The primary risk is that prolonged low inflation or deflation could limit returns, preventing the bond from doubling in value over time.

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