Quick Read – Paper Series EE and I bonds stop earning interest after 30 years, making all accrued interest fully taxable in the maturity year whether cashed or not. – A $78,000 single-year interest spike triggers three compounding hits: a higher federal bracket, 85% Social…
curity taxation, and Medicare IRMAA surcharges raising premiums from $203 to $528 monthly. – Redeeming bonds in annual tranches, staying below the $109,000 IRMAA threshold and coordinating with RMDs, can eliminate thousands in avoidable taxes. – A widow in her early 70s is cleaning out a safe deposit box and finds a stack of paper savings bonds her husband bought in the 1990s. Face value plus accrued interest comes to roughly $120,000, and about $78,000 of that is interest that has been quietly compounding for three decades
She assumes she can hold them, or cash them in slowly. Then her tax preparer breaks the news: the IRS does not care whether she cashes them. The bonds have hit final maturity, and every dollar of that accrued interest is taxable this year.
Paper Series EE and I bonds stop earning interest after 30 years, and the accrued interest is reportable at redemption or final maturity, whichever comes first. Bonds issued in 1996 hit that wall in 2026. Millions of dollars of these bonds are sitting in drawers right now.