Series EE savings bonds are issued by the US Treasury and backed by the US government, making them one of the safest ways investors can save for the long term. The Series EE savings bond maturity is 30 years, although they can be cashed in ('redeemed') within that period.
Series EE savings bonds have an initial maturity of 20 years. That is the period for which they pay a fixed rate of interest, which is set at the time that the savings bond is purchased.
Series EE savings bonds are sold at a 50% discount to their face value. The US Treasury guarantees that by the end of the initial maturity period, they will have earned their face value. That is, investors are guaranteed to double their money if they hold the bond for the full 20 years.
At this point the extended maturity period of a further 10 years begins. The interest rate that the savings bonds pay will change to whatever the Treasury guaranteed rate happens to be at that date.
At the end of thirty years, the bond reaches its final maturity. The Series EE Savings Bond maturity is 30 years, and it will not pay any interest after this date. While the investor does not have to redeem the bond at final maturity, there is no reason to hold it, since interest will no longer be paid.
Investors in Series EE Savings Bonds are able to defer the tax on the interest that the bonds pay until the bond is redeemed, or until final maturity. When the bond reaches final maturity, the tax becomes due to the IRS even if the bond has not been redeemed.
Series EE Savings Bond maturity is long enough to make the product attractive as a method of long term savings, particularly for investors who have a foreseeable future need for the funds - for instance, to finance a child's college education. However investors should note that while Series EE Savings Bonds can be redeemed after a year, there is a penalty of three months' interest if they are sold during the first five years.