EE bonds

[Landolink]

Not sure if this is discussed specifically on the site but we bought EE bonds from 2006 to 2022. First business day of the year. Today I redeemed the 2022 and 2021 purchases. Don’t plan to redeem any more but wondering what others are thinking. Basically plan to buy the 10, 20, and 30 year auctions coming up. Thoughts? I’m 58 and 30 x expenses.

[Texas Proud]

My EEs are going to start hitting 30 years early next year.. time to cash in..


I bought for 2 or 3 years when I first started working but never after that...


I am just not interested in them and have not been for a long time... I think you can get better yield with not much extra risk so if I were conservative that is where I would go...

[Sunset]

Quote:

Originally Posted by Landolink Not sure if this is discussed specifically on the site but we bought EE bonds from 2006 to 2022. First business day of the year. Today I redeemed the 2022 and 2021 purchases. Don’t plan to redeem any more but wondering what others are thinking. Basically plan to buy the 10, 20, and 30 year auctions coming up. Thoughts? I’m 58 and 30 x expenses.

Would it benefit you to wait the full 20 years so the bond is worth double the value, if that applies to the ones you bought ?

"We guarantee that the value of your new EE bond at 20 years will be double what you paid for it."

I'm thinking since EE bonds only pay 2.50% for currently purchased ones, there are a lot better deals out there.

[gauss]

Back in 2020 or so, when interest rates were very low, I purchased the maximum EE allowed for myself and DW for 2 years in a row.

My thought was that if I hold them 20 years then the YTM would be over 3% given that EE are guaranteed to double in 20 years. This rate seemed quite good compared to the low long term rates in effect at the time -- The EE's were issued with a nominal interest rate of 0.1%.

I suspect that it may make sense to redeem them early and purchase Treasury Bonds at current interest rates even though I would forgo a few years of 3% interest opportunity costs.

I am under the impression that I can easily redeem these electronic bonds early in my treasury direct account and receive the cash proceeds. (Can anyone confirm this?)

-gauss

[JoeWras]

Quote:

Originally Posted by gauss Back in 2020 or so, when interest rates were very low, I purchased the maximum EE allowed for myself and DW for 2 years in a row. My thought was that if I hold them 20 years then the YTM would be over 3% given that EE are guaranteed to double in 20 years. This rate seemed quite good compared to the low long term rates in effect at the time. I suspect that it may make sense to redeem them early and purchase Treasury Bonds at current interest rates even though I would forgo a few years of 3% interest opportunity costs. I am under the impression that I can easily redeem these electronic bonds early in my treasury direct account and receive the cash proceeds. (Can anyone confirm this?) -gauss

Yes, to redeem, it is a simple click of the button.

At 3 and 4 years, it means you have to wait 17 or 16 years for the doubling, which when it happens is effective rate of 3.5%.

I would redeem these and chase something else long. The market rate of a 20 year treasury is 5.1% today. Assuming the coupon payments are reinvested in just about anything, it should be a no-brainer. Or, use the coupon payments for living expenses.

Which reminds me... The coupons pay 2x per year so you will have income. They don't defer like savings bonds. This can be good or bad depending on your circumstance.

[gauss]

Thanks for the confirmation JoeWras.

I was thinking of investing in zero-coupon/STRIPS to simplify things and avoid reimbursement risk.

-gauss

[FiveDriver]

Back in the day, I used some EE bonds to fund my daughter's College Tuition. They were considered Tax Free if used for that purpose.

Does that Tax Free status still apply to EE Bonds cashed this year??

[gauss]

Quote:

Originally Posted by FiveDriver Back in the day, I used some EE bonds to fund my daughter's College Tuition. They were considered Tax Free if used for that purpose. Does that Tax Free status still apply to EE Bonds cashed this year??

According to this site, the education exclusion still exists if you meet all of the conditions.

Note that there is an income cap based on AGI.

-gauss

[FiveDriver]

Thanks gauss. We're under the AGI cap, so....alles ist schoen.

[easysurfer]

My final EE bonds I purchased during megacorp payroll deductions just matured. Drops mic.

[Landolink]

Quote:

Originally Posted by gauss Back in 2020 or so, when interest rates were very low, I purchased the maximum EE allowed for myself and DW for 2 years in a row. My thought was that if I hold them 20 years then the YTM would be over 3% given that EE are guaranteed to double in 20 years. This rate seemed quite good compared to the low long term rates in effect at the time -- The EE's were issued with a nominal interest rate of 0.1%. I suspect that it may make sense to redeem them early and purchase Treasury Bonds at current interest rates even though I would forgo a few years of 3% interest opportunity costs. I am under the impression that I can easily redeem these electronic bonds early in my treasury direct account and receive the cash proceeds. (Can anyone confirm this?) -gauss

I redeemed 2022 and 2021 purchases yesterday. Proceeds should be in my Cap 1 account tomorrow morning. Vey easy.

I don’t plan to redeem any more.

[gauss]

Thank you!
-gauss

[Texas Proud]

Quote:

Originally Posted by gauss According to this site, the education exclusion still exists if you meet all of the conditions. Note that there is an income cap based on AGI. -gauss

I have to find the one that are for one issued almost 30 years ago... hoping that it still works for DDs expenses... it did a few years back on DS education...