Do Series EE Bonds Continue to Earn Interest?
Series EE bonds, issued by the United States Treasury, are a popular savings instrument among investors and savers alike. These bonds are known for their stability and the assurance of earning interest over time. However, many people often wonder whether these bonds continue to earn interest after they are purchased. In this article, we will delve into this question and provide a comprehensive answer.
Yes, Series EE bonds continue to earn interest after they are purchased. When you buy a Series EE bond, it is issued at a discount to its face value. Over time, the bond will gradually increase in value until it reaches its face value on the bond’s maturity date. During this period, the bond will earn interest, which is compounded semi-annually.
The interest earned on Series EE bonds is exempt from state and local taxes, and in some cases, federal income tax. This makes them an attractive option for investors who are looking for a tax-efficient way to save money. The interest rate on Series EE bonds is set by the U.S. Treasury and is adjusted twice a year, in January and July.
It is important to note that the interest earned on Series EE bonds is not paid out to the bondholder until the bond matures. This means that the interest will continue to accrue and compound until the bond reaches its maturity date. At that point, the bondholder will receive the face value of the bond, plus any accumulated interest.
Series EE bonds can be purchased for as little as $25 and mature in 20 to 30 years. They are a great way to save for long-term goals, such as a child’s education or retirement. Since the interest earned on these bonds is not taxed until it is received, they can be an excellent tool for tax-deferred growth.
In conclusion, Series EE bonds do continue to earn interest after they are purchased. The interest is compounded semi-annually and is not taxed until the bond matures. These bonds are a solid investment option for those looking to save money over the long term while enjoying the benefits of tax-deferred growth.
