Actually you’re only half right. Effective this year banks or other financial institutions stopped selling paper savings bonds. However, you can still redeem them at your local financial institution. But, you definitely don’t have to redeem them. In fact, if you visit www.treasurydirect.gov, you can learn about converting your paper bonds to electronic savings bonds. When you redeem savings bonds you’ll pay ordinary income tax on the interest you’ve earned over the years. It’s impossible with the limited information you’ve provided for us (we’d have to have your complete tax picture as well as the amount of interest) to give you an accurate answer as to the tax impact of redeeming your bonds.