EE bonds pay 2.40%, but the 20-year doubling makes it 3.53%
Series EE bonds issued May through October 2026 earn 2.40% a year, yet Treasury lifts them to double at 20 years. The step is worth about $3,900 on $10,000.
- What happened
- Series EE savings bonds issued from May 2026 through October 2026 earn a fixed rate of 2.40% a year, set by the Bureau of the Fiscal Service on May 1, 2026. Treasury also states that a bond held 20 years is worth at least twice its purchase price, which works out to 3.53% a year. The next rate is scheduled for November 1, 2026.
- Why
- Interest accrues at 2.40%, compounded semiannually, for 20 years. If that falls short of doubling, Treasury makes a one-time adjustment at the 20-year mark. At 2.40%, compounding reaches only about $16,115 on $10,000, so the adjustment adds roughly $3,885 in a single month. A month short of 20 years, none of it is paid.
- The numbers that matter
- 2.40%EE fixed rate, bonds issued May 2026 through October 2026 (Fiscal Service, May 1, 2026)3.53%Annual rate implied by doubling in 20 years: 2^(1/20) − 1 (calculation)5.35%20-year Treasury par yield, October 26, 2026 (Treasury daily par yield curve)$10,000EE purchase limit per Social Security number per calendar year (TreasuryDirect)
- Why it matters
- An EE bond holder earns 2.40% if they cash out early and 3.53% only by holding to the day. Both sit below the 20-year Treasury yield of 5.35% on October 26, 2026.
- What happens next
- The Fiscal Service resets EE and I bond rates each May 1 and November 1. The November 1, 2026 announcement sets the fixed rate for EE bonds issued November 2026 through April 2027.
The 2.40% fixed rate is what an early redeemer gets; 3.53% is what a 20-year holder gets; the Treasury par curve paid 5.00% at 10 years and 5.35% at 20 years on October 26, 2026.
| EE fixed rate (May–Oct 2026 issues) | 2.4 |
|---|---|
| EE implied rate if held 20 years | 3.53 |
| I bond fixed rate (May–Oct 2026 issues) | 0.9 |
| 10-year Treasury par yield, Oct 26, 2026 | 5 |
| 20-year Treasury par yield, Oct 26, 2026 | 5.35 |
A Series EE savings bond bought in October 2026 and cashed in the 239th month after purchase is worth about $16,080 per $10,000 paid. Cashed in the 240th month, it is worth $20,000. Nothing in the economy changes between those two dates. The $3,900 difference is written into the bond's terms, and it is paid only to holders who reach the twentieth anniversary.
That is the odd shape of the EE bond. Its headline rate is 2.40% a year for bonds issued from May 2026 through October 2026. Its 20-year outcome, a doubling, is equivalent to 3.53% a year. Which rate a holder earns depends on the calendar. This piece sets out the arithmetic of both against the Treasury yields of October 26, 2026.
The rate is 2.40%; the doubling rule makes it 3.53%
The Bureau of the Fiscal Service's rate release of May 1, 2026 states: “Series EE savings bonds issued from May 2026 through October 2026 will earn an annual fixed rate of 2.40%.” The same release puts the Series I composite rate at 4.26%, of which 0.90% is a fixed rate for the life of the I bond. Rates for both series are reset each May 1 and November 1; the next announcement is scheduled for November 1, 2026.
The release says: “At 20 years, the bonds will be worth at least two times their purchase price.” TreasuryDirect's EE rate page puts it in the first person: “we guarantee that in 20 years it will be worth at least twice what you paid for it,” and adds that, if necessary, Treasury makes a one-time adjustment at 20 years. The rule applies to EE bonds issued since May 2005. After year 20 the bond keeps its fixed rate for 10 more years unless new terms are announced before then; interest stops at 30 years.
A sum that doubles over 20 years with annual compounding grows at 2^(1/20) − 1 = 0.03526, or 3.53% a year. Check: $10,000 × 1.03526^20 = $20,000. At a round 3.5% the result is $19,898, slightly short. The 3.53% is 1.47 times the stated 2.40% fixed rate.
TreasuryDirect credits interest monthly and compounds it every six months. At 2.40% a year, that is 1.20% per half-year, applied 40 times over 20 years. The compounding alone does not get near a doubling, so the adjustment at year 20 does most of the work.
$10,000 × (1 + 0.012)^40 = $16,114.64. The 20-year value is at least $20,000, so the one-time adjustment is $20,000.00 − $16,114.64 = $3,885.36, a 24.1% step in a single month. Inputs: 2.40% annual fixed rate, semiannual compounding at 1.20%, 40 periods. TreasuryDirect's published redemption values are the authority for any specific bond.
| Date set | Fixed rate | $10,000 compounded 20 years | Adjustment to reach $20,000 |
|---|---|---|---|
| May 1, 2026 | 2.40% | $16,115 | $3,885 |
| November 1, 2025 | 2.50% | $16,436 | $3,564 |
| May 1, 2025 | 2.70% | $17,098 | $2,902 |
| November 1, 2024 | 2.60% | $16,764 | $3,236 |
| November 1, 2022 | 2.10% | $15,186 | $4,814 |
| May 1, 2022 | 0.10% | $10,202 | $9,798 |
From November 2015 through October 2022 the fixed rate was 0.10%; a $10,000 bond from that era compounds to about $10,202 by year 20 and the adjustment supplies almost the entire return. The 2.40% set on May 1, 2026 is the lowest since the 2.10% of November 1, 2022.
The cliff: month 239 versus month 240
At 19 years 6 months, 39 compounding periods have run: $10,000 × 1.012^39 = $15,923.55. Five more months of pro-rata accrual add about $159, so the value in the 239th month is about $16,080. In the 240th month the adjustment lifts the bond to $20,000. $20,000 ÷ $16,080 = 1.244: a holder who leaves in the last month before the anniversary gives up roughly a quarter of the final value.
Two other rules sit earlier in the bond's life. TreasuryDirect states that an EE bond can be redeemed after 12 months, and that one cashed in less than 5 years loses the last 3 months of interest. Neither is large at 2.40%: three months of interest on a bond worth about $11,267 at year 5 is roughly $23. The 20-year step is the rule with teeth.
$10,000 × 1.012^20 = $12,694.34 after 10 years. The annualised return is 1.2694^(1/10) − 1 = 2.41%, the fixed rate with the small lift from semiannual compounding. No part of the doubling adjustment is earned by a holder who leaves before the anniversary. It is a payment for reaching year 20, not an accrual that builds toward it.
Against the Treasury curve on October 26, 2026
Treasury's Daily Treasury Par Yield Curve Rates table for October 2026 shows, for October 26, 2026: 1-year 4.47%, 2-year 4.68%, 5-year 4.84%, 10-year 5.00%, 20-year 5.35% and 30-year 5.31%. On October 1, 2026 the 20-year was 5.64% and the 10-year 5.24%, so the 20-year fell 29 basis points over the month. The par curve is the yield at which a new Treasury of each maturity would be issued at par.
A 20-year Treasury pays 5.35% in two coupons a year. If every coupon were reinvested at 5.35%, $10,000 × (1 + 0.02675)^40 = $28,747. The EE bond held 20 years reaches $20,000. Difference: $8,747. Coupons are in fact reinvested at whatever rates exist when they arrive, so the Treasury figure is an illustration, not an outcome; the EE figure is fixed by the bond's terms.
$10,000 × (1 + 0.025)^20 = $16,386 with coupons reinvested at 5.00%, against $12,694 for an EE bond redeemed at 10 years. Difference: $3,692. The gap is proportionally wider than at 20 years because the doubling adjustment has not arrived.
Read as a 20-year bond, the EE pays 3.53% against a par yield of 5.35% on October 26, 2026: 182 basis points less. Cashed earlier, it pays 2.40% against a 10-year yield of 5.00% or a 1-year yield of 4.47%. What it offers that a marketable Treasury does not is a redemption value that never falls and a doubling that does not depend on reinvestment rates. Whether that is worth the gap is the reader's judgement, and yields change daily.
Taxes: federal yes, state no, college maybe
TreasuryDirect's EE bond page lists “Federal income tax: Yes” and “State and local income tax: No.” The state exemption rests on 31 U.S.C. 3124(a): “Stocks and obligations of the United States Government are exempt from taxation by a State or political subdivision of a State,” with exceptions for nondiscriminatory corporate franchise taxes and estate or inheritance taxes. The same section covers marketable Treasuries, so the exemption does not separate EE bonds from the 20-year Treasury; it separates both from bank deposits and corporate bonds.
For a saver whose state taxes interest at 5% (an assumed rate, not a figure from any state), a bank product paying 5.00% nets 5.00% × (1 − 0.05) = 4.75% after state tax and before federal tax. An EE bond or Treasury at the same rate keeps the full 5.00%. The reader's own state rate is the input to replace; T-bills versus savings after state tax runs the same arithmetic for short maturities.
TreasuryDirect states that the earnings may be tax-free “if you use the money for qualified higher education expenses.” The mechanism is IRS Form 8815, whose instructions set four conditions: bonds issued after 1989; an owner “age 24 or older before the bonds were issued”; qualified higher education expenses paid in the tax year for the owner, spouse or dependents; and any filing status except married filing separately. The exclusion then phases out with modified adjusted gross income.
Revenue Procedure 2025-32, released October 9, 2025, states that for tax year 2026 the exclusion “begins to phase out for modified adjusted gross income above $152,650 for joint returns and $101,800 for all other returns” and “is completely phased out for modified adjusted gross income of $182,650 or more for joint returns and $116,800 or more for all other returns.” For tax year 2025 the Form 8815 figures are $99,500 to $114,500 and $149,250 to $179,250. The band is $15,000 wide for single filers and $30,000 for joint filers in both years.
A bond bought in a child's name does not qualify, for the child or the parent. A bond bought by a parent aged 24 or over, in the parent's name, may qualify when redeemed for the child's tuition, subject to the income limits in the year of redemption. A 20-year bond bought in 2026 is tested against the 2046 thresholds, which do not exist yet.
What it means for your money
Four mechanical facts cover most of what a household needs to know.
- The limit. TreasuryDirect allows up to $10,000 of EE bonds per Social Security number per calendar year, from $25 upward. At 2.40%, $10,000 earns about $241 in the first year; held 20 years, it is worth $20,000.
- The two rates. The holder earns 2.40% a year (2.41% with compounding) at every redemption date from month 12 to month 239, and 3.53% a year only by redeeming in or after month 240. There is no partial credit for coming close.
- The yield gap. On October 26, 2026 the 20-year Treasury par yield was 5.35%, 182 basis points above the EE bond's 20-year rate: with coupons reinvested at 5.35%, about $28,747 against $20,000 on $10,000. A marketable Treasury sold before maturity may fetch more or less than $10,000; the EE bond's redemption value never falls.
- The taxes. Both escape state income tax under 31 U.S.C. 3124. EE interest may also be excluded from federal tax for tuition under Form 8815 if the owner was 24 or older at issue and income is under the limits for the year of redemption.
None of this says whether anyone should hold an EE bond. The piece on the I bond rate formula explains the sibling product, whose 0.90% fixed rate is paired with an inflation component, and TIPS real yields versus I bonds runs the inflation-protected comparison. The EE bond is the only one of the three whose 20-year value is known in dollars on the day of purchase. The compound growth entry shows why 2.40% versus 3.53% matters more over 20 years than over one.
Sources
- Fiscal Service Announces New Savings Bonds Rates, Series I to Earn 4.26%, Series EE to Earn 2.40% (press release, May 1, 2026)Bureau of the Fiscal Service, U.S. Department of the Treasury (federalinvestments.gov mirror of TreasuryDirect) · Oct 27, 2026 · Primary source
- EE bond interest rates for bonds issued since May 2005TreasuryDirect, Bureau of the Fiscal Service (savingsbond.gov mirror) · Oct 27, 2026 · Primary source
- EE bondsTreasuryDirect, Bureau of the Fiscal Service (savingsbond.gov mirror) · Oct 27, 2026 · Primary source
- Daily Treasury Par Yield Curve Rates, October 2026U.S. Department of the Treasury · Oct 27, 2026 · Primary source
- Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 (2025)Internal Revenue Service · Oct 27, 2026 · Primary source
- Revenue Procedure 2025-32, tax year 2026 inflation adjustments, section 4.17 (October 9, 2025)Internal Revenue Service · Oct 27, 2026 · Primary source
- 31 U.S.C. 3124, Exemption from taxationUnited States Code via govinfo.gov (Government Publishing Office) · Oct 27, 2026 · Primary source
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