Bond exchange / purchase question

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jmch1990
Posts: 72
Joined: Wed Dec 23, 2020 8:45 pm

Bond exchange / purchase question

Post by jmch1990 »

Hello,

I have three EE bonds that are set to fully mature at different points in the next couple of years (October 2022, December 2022, and November 2023), each earning 4% interest. They were listed in my name when I was a child, and are currently each worth between $15,000 and $20,000. However, with I Bonds likely to return a little over 5% over the next year (combining the current 3.54% rate with the expected ~6.5% rate to come in October), I am thinking it makes sense to redeem one of these bonds and purchase $15K of IBonds (we currently have bought $5k for the year and there are two of us) with the redemption. (We are slightly overweight in bonds according to our AA, not enough to trigger a rebalancing, which is why I am considering this exchange vs. a cash purchase or rebalancing from stocks.)

If the answer is no, is there another consideration? If the answer is yes (as I am leaning towards), are there any factors that would make selling one EE bond better than another? For example, if we redeem the largest one (which matures first, in October of next year), we would have the highest tax bill, but it's a bill we would be paying soon anyway, and we would also keep that 4% interest (still good for bonds) on the other two for a bit longer.

Thank you for your assistance.
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Bond exchange / purchase question

Post by 000 »

At what rate will the EE bonds compound if you don't redeem? I seem to recall the rate could be variable between years 20 and 30?

Remember that the base rate for I bonds is currently zero and the current compound yield is due to recent CPI which might (probably not, in my view) subside in the future.
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