27 Dec Can I convert EE Savings Bonds into I Bonds?

Q. Can I convert U.S. Savings Bonds EE that have already matured into I Bonds?
— Investor

A. I Bonds are certainly popular these days, thanks to higher inflation.

We don’t have good news for you on such a transfer.

There is no option to directly convert Series EE Savings Bonds to Series I Bonds, said Brian Schiess, a certified financial planner with Modera Wealth Management in Westwood.

“The ability to convert E or EE bonds to another type of bond, called HH bonds, was a strategy that existed until 2004 as a way to further defer accrued interest,” he said. “However, there was never an option to convert to I Bonds.”

Therefore, when you cash in your series EE bonds, you can simply use the proceeds to purchase I Bonds, he said.

When you cash in your EE bonds, you will pay federal but not state income taxes on the interest portion of the redemption, he said.

Then you will have to set up an account at TreasuryDirect.gov to purchase I Bonds, which will be issued in electronic format.

“Each Social Security number or Employer Identification Number can purchase up to $10,000 of I Bonds per year — $20,000 per married couple,” Schiess said. “When filing your taxes, you can use your federal income tax refund to purchase an additional $5,000 of I Bonds. These I Bonds will be issued in paper format and will be mailed to you.”

I Bonds cannot be cashed in within the first 12 months of owning the bond, he said. Additionally, if you cash in an I Bond within the first five years, you forfeit the last three months of interest, Schiess said.

For example, if you cash in after 18 months, you will receive only 15 months of interest. I Bonds earn interest for a maximum of 30 years, at which point they reach final maturity, he said.

But of course, the interest rates will be reset twice a year.

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This story was originally published on Dec. 27, 2022.

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