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Updated on Monday, June 24, 2019
War is hell, said General William Tecumseh Sherman. War is also very expensive, and selling bonds to citizens was one of the main ways the U.S. paid for the wars it fought throughout the 20th century.
The U.S. first sold war bonds in 1917 as it entered the Great War in Europe, later known as World War I. Selling bonds helped finance the conflict, but beyond that it also gave citizens a way to show their support for the war effort and the troops sent off to France.
War bonds are no longer being sold today, but old bonds may still be worth something. If you’ve just rediscovered these types of bonds you bought years ago, we’ll help you figure out whether you can still cash them in, and how much value those old bonds still hold.
A brief history of war bonds
These bonds were first sold in the U.S. under the name Liberty Bonds in 1917 to help finance U.S. participation in World War I. The government appealed to Americans’ sense of patriotism to help sell Liberty Bonds. Propaganda posters and celebrity endorsements were employed to fuel sales of the bonds. Even the Boy Scouts got in on the action, helping sell Liberty Bonds all over the country. All told, the government raised $21.5 billion in Liberty Bonds to finance the war.
Sales of Liberty Bonds were discontinued in 1918. But when war returned to Europe in 1939, the U.S. government began planning to reissue “Defense Bonds” to prepare for the possibility the country could become involved in the conflict. After the attack at Pearl Harbor and the U.S. entry into World War II, Defense Bonds were rechristened as War Bonds. During World War II, over 80 million Americans bought these bonds, raising over $180 billion.
The U.S. government brought back these bonds most recently in December 2001, three months after the Sept. 11 attacks. Labeled as Series EE Patriot Bonds, these bonds have a maturity period of 30 years. Patriot Bonds were sold at financial institutions nationwide until they were discontinued in 2011. The proceeds went towards global anti-terrorism efforts.
How do war bonds work?
Like any other savings bond, these bonds are debt securities that earn interest over a predetermined period of time. Each war bond had a face value between $10 and $10,000, which is the amount you receive when the bond reaches the end of its term, also known as maturity. As for what you pay upfront, you typically buy one for somewhere between 50% and 75% of the face value of the bond.
Unlike standard savings bonds, war bonds are zero-coupon bonds, which means they do not make interest payouts throughout the term. Instead, you receive the full payout when you redeem this type of bond after it has matured. To get the maximum out of your investment, you’d do best to keep it until it matures completely. Otherwise, you’d lose out on the opportunity to earn more interest.
By way of example, you could buy a $500 war bond for $375, or 75% of the face value of the bond. During the bond’s lifetime, it would accrue interest on the $375 principal for the length of its term. When the bond reaches maturity, you would receive $500, in addition to interest earned over the term.
If you bought the original defense bonds from just before the U.S. entry to WWII, you’d have to wait for the 10-year term to end to cash out. Later, Congress extended these bonds’ maturity lengths so that Series E bonds issued between May 1941 and November 1965 could earn interest over 40 years.
As for the interest rates, they tend to offer returns below market value, making them a less than optimal savings vehicle. For example, when Liberty Bonds first came out, they had an interest rate of 3.5% which was lower than the standard market interest rates at that time. This was one reason why these bonds were a tool to show your support for your country during war time, rather than an instrument solely to earn interest.
War bonds value today
The U.S. Treasury provides a handy tool to calculate the value of your bonds. You’ll need to input the series type (EE, E, I or Savings Notes), the denomination and issue date of the bond. You may also include the bond’s serial number. Then the calculator will spit out the bond’s total value, original issue price, total interest earned and final maturity date.
To get an idea of what these bonds might be worth, let’s look at an example. Let’s say you have a $500 Series E bond from April 1941. Using the calculator, that bond would be worth $1,811.80 today (June 2019), having earned $1,436.80 in interest. You’d also find that it was originally bought for $375 and it matured in April 1981.
How do I redeem war bonds?
If you already have one of these bonds, you can redeem them over the counter at a bank or credit union just like savings bonds. Just be sure to check ahead of time whether the bank has cashing amount limits, can cash bonds and can accommodate you if you’re not a customer. You can also send your war bond(s) to Treasury Retail Securities Services, PO Box 214, Minneapolis, MN 55480-0214.
Note that these bonds are non-transferable, so generally you cannot cash one that’s not in your name. There are a few exceptions, like if you are a parent of a minor who is named as owner or co-owner, named as beneficiary or requesting payment as a legal representative. No matter if you cash it in person or through the mail, you’ll need to provide some sort of identification verification. If you visit a bank in person, this can be your driver’s license. But if you mail your bonds to be cashed, you’ll also need to provide your Social Security number and signature verification on each bond you submit from a certifying officer at a bank where you have an account. You must also include your direct-deposit information on FS Form 5396.