Best Savings Bonds
Bonds are an excellent low-risk investment that can be used to save and diversify your portfolio. There are numerous types of bonds available, but many investors choose to stick with corporate or savings bonds.
Corporate bonds are offered by companies that are raising cash. These bonds are offered in short-, medium- and long-term maturities. Longer-term corporate bonds typically offer higher interest rates but involve higher risk.
On the other hand, savings bonds are purchased from the U.S. Department of the Treasury and are considered one of the lowest risk investment options available. Since savings bonds have longer-dated maturities coupled with lower risk, they might be more suitable for your long-term savings goals.
The following guide details the best savings bonds of 2023 to help you learn about how bonds work, where you can buy them and how they can help improve your long-term personal finances.
Our top picks for best savings bonds
- Best for college savings: Series I savings bonds
- Best for retirement savings: Series EE savings bonds
Best savings bonds reviews
Best for college savings: Series I Bonds
- Interest rates rise during times of high inflation.
- Because I bonds are backed by the U.S. Treasury, they are low risk.
- I bonds are a safe option to diversify your portfolio.
- Rates are variable, so they may go down as inflation subsides.
- There are limitations on redemption and early withdrawal penalties.
- There is a maximum annual combination of $15,000 in electronic and paper I bonds.
Why we chose it: Series I savings bonds, or I bonds, are a good investment to save for higher education expenses. In addition to their many other benefits, I bonds can be taxed annually or deferred until redemption or maturity, and they are not subject to state or local taxes. But if you use redeemed amounts for qualified educational expenses, you may be able to entirely avoid taxes on the interest earned.
I bond interest rates are designed to combat inflation. They offer a composite rate, which is a combination of a fixed rate and variable rate. The fixed portion, as its name implies, remains the same while the variable rate changes every six months according to inflation as measured by the Consumer Price Index (CPI). The variable interest rates are compounded on principal, which allows you to earn more interest. However, since part of the rate is variable, they can also go down if the CPI subsides.
Savings bonds are backed by the full faith and credit of the U.S. Department of the Treasury, making them nearly risk-free since the U.S. federal government has never defaulted on its debts. Because of their low risk, purchasing I bonds is an excellent way to diversify your portfolio, build your savings and protect yourself from losses stemming from your higher-risk investments.
Series I bonds earn interest for up to 30 years, and the earliest you can cash out an I bond is 12 months after purchase. If you redeem it in fewer than five years, you forfeit the last three months of interest they have accrued. In a calendar year, you are limited to $10,000 in electronic bonds, but you can also purchase $5,000 in paper I bonds with your tax refund.
Best for retirement: Series EE Bonds
- Series EE bonds are guaranteed to double in value in 20 years.
- The interest rate is fixed for at least 20 years.
- EE bonds provide a safe and fairly liquid investment that is backed by the U.S. Treasury.
- EE bonds' interest rates are lower than I bonds.
- You are limited to buying $10,000 in EE bonds in one year.
- There are limitations on redemption and early withdrawal penalties.
Why we chose it: Series EE bonds are a good investment for retirement savings or other long-term savings goals as their interest rates are fixed for the first 20 years, and they’re guaranteed to double during that same period. If the bond fails to double in value after that time, the U.S. Treasury makes up the difference, thus guaranteeing your investment.
After 20 years, the U.S. Treasury may adjust the interest rate for Series EE bonds. EE bonds earn monthly interest, but the interest is compounded twice a year to begin earning on the new principal. However, while the fixed rate guarantees your rate won’t go down, they’re typically lower than those offered for I bonds.
Like I bonds, Series EE bonds are also a safe investment since they’re backed by the U.S. government. Since you can redeem them before maturity (sacrificing some of your interest), they are also fairly liquid.
However, there are some limitations. You can’t cash them in for 12 months after purchase. Additionally, if you redeem them within five years of purchase, you lose the previous three months’ interest as an early withdrawal penalty.
One Social Security number can be associated with the purchase of up to $10,000 of EE bonds per calendar year. If more than one person is buying the bond, the amount is added to the limit of the first person named on the bond.
Comparison of I Bonds and EE Bonds
| Type of savings bond | Interest rate | Purchase limit | Maturity period | Minimum holding period |
| Series EE | A fixed interest rate is set when you buy the bond and may be adjusted after 20 years. | There’s a $10,000 maximum per calendar year. | 30 years | At least 12 months, and there’s an early withdrawal penalty if redeemed within five years of purchase. |
| Series I | A composite rate combines a fixed portion and a variable portion, the latter of which changes every six months according to inflation. | There’s a $10,000 maximum per calendar year for electronic bonds and a $5,000 maximum per calendar year for paper bonds purchased with your tax return. | 30 years | 12 months, and an early withdrawal penalty if redeemed within five years. |
Savings bonds guide
Keep reading to learn more about the different types of savings bonds, what you should consider before purchasing them and how you can invest in bonds.
What factors should I consider before investing in savings bonds?
Consider investigating the following factors before buying savings bonds:
Interest rates: The government’s TreasuryDirect website lists the current interest rates for each type of bond. I bonds typically have higher interest rates than EE bonds, but there is also a higher risk of the interest rate dipping over time. For example, investors could buy I bonds with 6.89% interest at the beginning of 2023, but the rate has since dropped to 4.30% as of this writing.
Maturity: Both I bonds and EE bonds reach full maturity after 30 years. Make sure you understand the long-term characteristics of bonds before buying.
Liquidity: Research the penalties and tax implications of redeeming each type of bond before the date of maturity. Series I bonds and Series EE bonds both restrict early redemption for the first 12 months. After that, you will have to forfeit three months of interest as a penalty if you redeem your bond within five years of purchase. However, savings bonds are still considered fairly liquid, allowing you to access the funds if needed.
Tax requirements: Savings bonds are subject to federal income tax but not state or local income taxes. You may also have to pay gift, estate or inheritance taxes on their redeemed values under certain conditions. However, you may avoid taxes by using the earnings for higher education expenses. Be sure to research how to file your taxes with the IRS before purchasing the bonds.
Risk: Savings bonds are considered some of the lowest risk investments you can make. They’re backed by the U.S. federal government, which has never defaulted on its debt. Even compared to other types of bonds, they’re very low risk. The riskiest aspect of savings bonds would be the variable rate for I bonds, which could dip if inflation decreases (though the fixed rate prevents the overall rate from dropping too low), or a potentially lower rate for EE bonds after the first 20 years when the fixed rate expires.
How do savings bonds work?
When you buy bonds, you're essentially providing a loan to the seller. In the case of savings bonds, you're loaning money to the U.S. government. The U.S. Treasury then issues your savings bonds and promises to repay the cost of the bond plus interest down the road.
There are two types of savings bonds currently being sold: Series I bonds and Series EE bonds. They work similarly, each maturing after 30 years and having the same tax requirements. The main difference between the two series is how interest is earned. EE bonds have a fixed rate that doesn’t change unless the U.S. Treasury decides to adjust it, which can only happen after 20 years. I bonds’ interest rates are leveraged to inflation and adjusted biannually to reflect changes in the CPI.
Both types of bonds earn interest monthly and compound interest semiannually, which means your principal is regularly adjusted to include the interest you earned in the previous six months and you'll begin to earn interest on that new principal for the following six months. However, you don’t receive the interest until you redeem your bonds or they reach maturity.
How much do savings bonds cost?
You can purchase savings bonds for very low amounts. Electronic bonds in both Series I and Series EE start as low as $25, and you can buy them for any amount between $25 and $10,000.
However, you can also purchase paper Series I bonds with your tax return. The limit is $5,000 and they are available in increments of $50, $100, $200, $500 or $1,000.
Electronic savings bonds are purchased through the TreasuryDirect website. However, when you buy I bonds using your tax refund, you use IRS Form 8888 to specify how much you want to purchase.
What is the current interest rate for savings bonds?
The current interest rate for Series EE bonds is 2.5% for bonds issued between May 1, 2023 and Oct. 31, 2023. The current interest rate for Series I bonds is 4.3%, including a 0.9% fixed rate, for bonds issued between May 1, 2023 and Oct. 31, 2023. The U.S. Treasury applies new interest rates in November and May of each year.
How long do savings bonds take to mature?
Savings bonds take 30 years to mature. However, they are a fairly liquid asset that you can redeem early if you need access to the funds. While you can’t redeem them within the first year, you can easily cash in your bonds afterward. Keep in mind that if you redeem your bonds within the first five years, you'll forfeit the last three months of interest as an early withdrawal penalty.
You have two options for reporting and paying taxes on savings bond interest: You can defer taxes until you receive the interest when you redeem your bond or when it reaches maturity. Or you can report the earned interest each year and pay taxes on it as you go.
Some people choose the second option to avoid paying potentially higher tax rates in the future, and to avoid paying a large amount of taxes all at once when they redeem their bonds or when they mature.
Limits are tracked by Social Security number, so if you purchase a bond with another person, the cost of the bond is put toward the limit for the first person listed on the bond.
Series I bonds have a composite rate that combines a fixed rate and a variable rate. The fixed portion of the composite rate is determined similarly to the fixed rate for EE bonds, but it's often lower because it's combined with the variable rate. The variable rate may change up to twice a year and is determined by inflation as measured by the CPI.
How we found the best savings bonds of 2023
We used the following factors to evaluate the best savings bonds:
- Interest rates: We researched current interest rates and how savings bonds earn interest over time. We compared the interest of both types of bonds to determine which would be the best fit for specific investing goals.
- Liquidity: We analyzed the liquidity of savings bonds to ensure they offer investors access to funds if needed.
- Risk: We provided information about the low risk of default on savings bonds, as well as the risk that I bonds’ interest rates could dip. Therefore, investors can make the most informed decision.
- Cost: We determined that savings bonds are a practical and affordable way to get started with investing and provided details about the cost of each bond series.
Summary of the best savings bonds of 2023
Series I Bonds are a great way to bolster college savings. They can help supplement the best 529 plans, and you can use your bond income for qualified higher education expenses, potentially allowing you to avoid paying income taxes on those gains.
Series EE bonds are better as a means of supplementing retirement savings. Because the federal government guarantees that they will double in value over the first 20 years, these bonds offer a low-risk complement to a 401(k) or Roth IRA.