You may have asked yourself, how the heck does this happen? How do you forget to redeem a bond?
It’s actually quite simple. Back in the days before TreasuryDirect, you would buy your bonds at your local bank. You would be issued a paper certificate. Most people filed these away in a safety deposit box or stuck them in with their other financial files. Series EE and Series I bonds earn interest for thirty years. After 30 years, they stop earning interest and you have to redeem them. People simply forget they have them!
With TreasuryDirect and electronic bonds, you don’t have to worry about that. After thirty years, the bonds automatically convert into a Zero-Percent Certificate of Indebtedness. C of I is simply their fancy name of a certificate that earns nothing. From here, you can withdraw the funds into your bank account or use it to buy another bond. You can always convert a paper bond into an electronic bond.
If you’ve located a paper bond and don’t know how to redeem them, TreasuryDirect has some great resources explaining it:
- Redeeming Series I Bonds
- Redeeming Series EE Bonds
- Special situations for both – Children’s bonds, deaths, residency outside the United States
Jim writes about personal finance at Bargaineering.com.