Paper bonds are uncommon these days. However, back when I was born, it was common for parents and grandparents to buy 30-year treasury bonds for their newborn babies as a method of saving.

Now in September 2020, the 30-year treasury rate is 1.43%, when annual inflation has been around 1.54%, which doesn’t seem like a good deal. However, back then, some EE bonds promised a 4% interest rate, which has kept up well with inflation these past 30 years.

A simple inflation calculator shows that to have the same value as $75 in January 1991 you need to have $143.13 in September 2020. However, one such EE bond that cost $75 in January 1991 is worth $155.52 as of September 2020. This is return of $12.39 over inflation.

Many millennials who are just turning 30 do not know what to do with this form of paper money. So here is a guide for how to find out what your bond is worth, decide whether you should keep it until maturity or cash out early, and how to get money for your paper.

1. Check the value.

You can check the value and maturity of your bond at TreasuryDirect.Gov. To do this, you need the following:

1. Which series of bond you have – This should be printed in the upper right hand corner. My husband’s was Series EE.
2. The denomination – This is printed as a number in the money font in the upper left.
3. The serial number – This is printed in several places, including as a large number that ends with an EE printed in the bottom right corner of the bond.
4. The issue date – This is printed below the Series identifier as a month and a year. You can enter them all together as one number string.

Then click calculate and in the area below these input fields you should see your bond’s current facts.

2. Decide when to cash it.

If the interest rate is higher than current rates and/or higher than inflation you likely have a good bond to keep. If it is lower, you may do better cashing it out early.

Another important feature is Next Accrual and Final Maturity. If you are going to cash it, waiting until the next accrual is likely a good idea. If you are not going to cash in early, the final maturity is the date to put in your calendar for when you should go collect its earnings.

3. Get money for your bond.

The bonds can be redeemed at any local bank. You’ll need to bring two proofs of identification where both a driver’s license and credit or debit card count. If you have changed your name, you should also bring a copy of your marriage certificate or court letters so that they can verify that you are the same person.

After verifying your identity and presenting the bond, you will be asked to fill out the form on the back of the bond with your signature, Social Security number, and current address. When that is complete, the teller will hand you cash worth the maturity value of the bond and a receipt.

4. Report on your taxes.

Although you are allowed to pay taxes on the accrued interest of EE Bonds each year you accrue this phantom income, many of us children do not even know that we own these types of bonds until we are on our own as adults. By that point, if you have already held a job and/or filed a tax return, you have likely already unfortunately elected to defer your interest payments by default. This is unfortunate as likely over half of the years interest was accruing you were a child who would have owed no taxes on that interest. Oh well.

If you did defer taxation, then the year you cash out your bond is the year you owe tax on all the interest accrued. As these bonds are typically small denominations, the interest is often a small amount. For my example bond, the interest was $118.02 of the $155.52 earned.

Unfortunately, that means that approximately 22% or $25.96 might be lost to taxes. As the bond only had an advantage of $12.39 over inflation, this means that between taxes and inflation, the government could rob up to $13.57 in purchasing power (12.39-25.96).

It is my understanding that the bank gathers your Social Security number and mailing address so that they can report your taxable interest to both you and the IRS. However, it never hurts to separately record the necessary information to make sure your filing is accurate.

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