Early-redemption penalty
You cannot cash an I or EE bond in its first 12 months. From 12 months to 5 years you can redeem, but you forfeit the last 3 months of interest. After 5 years there is no penalty — you keep everything. The penalty is modest (3 months of interest on a low rate), which is why a 1-year hold is often treated as the practical minimum. Bonds stop earning at 30 years. Use the value calculator to see the penalty for your bond.
Source: TreasuryDirect. Data as of May 2026.
The redemption timeline
| Time held | Rule |
|---|---|
| 0 to 12 months | Cannot redeem at all (locked). |
| 12 months to 5 years | Redeemable, but you forfeit the last 3 months of interest. |
| 5 years or more | No penalty — you keep all interest. |
| Applies to | Both Series I and Series EE savings bonds. |
| 30 years | Final maturity — the bond stops earning interest. |
Source: TreasuryDirect. Data as of May 2026.
How to minimize the penalty
- Hold 5 years if you can — the penalty disappears entirely at the 5-year mark.
- Time the rate: if you must cash before 5 years, do it after a lower rate has been in effect for 3 months, so the forfeited 3 months are at the lower rate.
- Redeem early in a month: interest posts on the 1st, so cashing on the 2nd vs the 28th earns the same — redeem at the start of the month after interest posts.
- Watch the 1-year wall: nothing can be cashed in the first 12 months, so do not buy money you might need within a year.
Frequently asked questions
What is the I bond early-withdrawal penalty?
If you cash a Series I or EE bond before holding it 5 years, you forfeit the most recent 3 months of interest. You also cannot cash a bond at all in its first 12 months. After 5 years there is no penalty.
How much is the 3-month penalty worth?
It is the interest the bond earned in its last 3 months, at the composite rate then in effect. For a $10,000 bond earning 4%, three months of interest is roughly $100. The penalty is small relative to the principal, which is why many savers treat a 1-year I bond as a flexible inflation hedge.
When is the best time to redeem an I bond to minimize the penalty?
If you must cash before 5 years, redeem just after a new (lower) rate has been in effect for 3 months, so the 3 forfeited months are at the lower rate. Ideally, wait until you have held the bond 5 years to avoid the penalty entirely. Also redeem early in a month — interest posts on the first, so you do not earn for partial months.
Related
Not investment or tax advice. BondValue is an independent reference, not affiliated with the U.S. Treasury or TreasuryDirect. Savings bond rates reset every 6 months (on May 1 and November 1), and any value shown here is an estimate. Verify current rates and the exact penny value of your bonds at TreasuryDirect’s official Savings Bond Calculator. Consult a qualified professional before making financial decisions.
Last updated: 2026-06-21