Over 20 million U.S. savings bonds, worth over $9 billion, have matured and stopped paying interest, according to the Treasury Department. The department says the unredeemed bonds are worth roughly five to ten times what the owners paid for them, mostly because of the accumulated interest. The Web site www.bondhelp.com estimates that bondholders have lost out on over $2 billion of interest in the last 12 years.

Most of these bonds stopped earning interest after 30 years, but some stopped in only 20 years and some as long as 40 years. You can find out which bonds have stopped earning interest by going to the Treasury Department's savings bond Web site, www.savingsbonds.gov and clicking on Treasury Hunt. Bondholders who have lost bonds also may be able to track them down through the site if the bonds have been returned to the Treasury Department.

As of May 2002, bonds that stopped paying interest include:

• Series E bonds issued from May 1941 through May 1962 and from December 1965 through May 1972
• HH bonds issued from January 1980 through May 1982
• All savings notes 
• H bonds over 30 years old.

The government has made some effort to contact bondholders, but many bonds continue to go unredeemed. The owners either have lost track of their bonds, forgotten that they own them or don't realize they've stopped paying interest. Part of the problem is that some of the bonds don't pay out interest until the bonds are redeemed, and bondholders forget about them after a while.

Seniors, many of them desperate for income because so much of their fixed-income investments are paying low interest these days, could certainly use the extra money from forgotten bonds. But the oversight is not just among seniors who traditionally have invested in savings bonds. Parents and grandparents often give savings bonds to young children and grandchildren, so even people currently in their 30s may own matured savings bonds stashed away that they've forgotten about.

Even if you don't need the money from the savings bonds at the moment, it still pays to either exchange them for new HH savings bonds (and delay any taxes due) or cash them in, take the tax hit, and reinvest them in savings bonds or other government bonds, or even other types of investments depending on your financial needs. Otherwise, you're giving the government an interest-free loan and throwing away money.

As of May 2002, EE bonds were paying 3.96 percent, a rate that will stay until November 2002 when new rates are issued. HH bonds are paying 4.0 percent, and the inflation-indexed Series I are paying a variable inflation rate of 2.57 percent, based on recent increases in the Consumer Price Index, in addition to an underlying fixed rate of 2.0 percent. You can exchange or cash in savings bonds through your local bank, financial institution or the U.S. Treasury Department.

Is it worth exchanging or buying savings bonds in comparison with other investment alternatives? Many investors, burned by the stock market decline, have grown more conservative, and savings bonds certainly are attractive in that regard. Backed by the federal government, they're risk-free from default. Interest payments aren't as favorable as some other Treasury bonds, but generally they'll beat certificates of deposit, money markets and bank savings accounts. Because fixed-income investments are vulnerable to inflation, investors are finding inflation-indexed savings bonds attractive, particularly if inflation heats up.

All savings bonds are free of state and local income taxes, which can be very helpful in high-income-tax states such as California and New York, though taxpayers often forget and end up including the income on their return. The interest is tax deferred from federal tax until you redeem the bonds, and the interest is free of federal income tax altogether if qualified families (generally middle or lower income) use it to pay for education expenses.

Keep in mind that you can't redeem a new savings bond for the first six months, and if you redeem it in the first five years, you lose three months' worth of interest.