The purchase price of the bonds is 50 percent of the face value. Bonds cannot be redeemed if held for less than 6 months. Bonds that are held longer than 6 months will earn a fixed rate of interest that gradually increases as the holding period is extended. Bonds held for 5 years or longer will earn the average of the market-based rate but with a guaranteed minimum rate. The rate earned is set at 85 percent of the 5-year Treasury bond and is calculated according to a formula.
Savings bonds have two dates of maturity.
The first is known as the original maturity date. At this point, the bond value will be equal to approximately the original purchase price plus interest accrued at the minimum-guaranteed rate. The second maturity date is currently 30 years from the purchase date. At this point, interest will stop accruing on the Series EE bond, and the owner will either have to cash the bond and pay taxes on the accrued interest or convert the bond to a Series HH bond. Converting to a Series HH bond will continue to defer taxes on the accrued interest, but future interest on the Series HH bond will be taxable in the year received.