What Is the Penalty for Early Withdrawal of I Bonds?
Learn about the penalties for cashing in I bonds early, including the three-month interest forfeiture within five years.
Video transcript
The penalty for early withdrawal of I bonds is the loss of the last three months' interest if redeemed within the first five years. This means if you cash in your I bonds before they have aged for five years, you forfeit the interest accrued in the most recent three months. After five years, you can withdraw without any penalty.
Questions and answers
Can I redeem I bonds without penalty after five years?
Yes, you can redeem I bonds after five years without any penalty or loss of interest.
What happens if I cash in I bonds before five years?
If you redeem I bonds before five years, you will lose the last three months' worth of interest as a penalty.
How is the penalty for early withdrawal of I bonds calculated?
The penalty is the forfeiture of the interest earned during the most recent three months if redeemed within five years.
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