Replacing 0% I-bond... or not?

[tibbitts]

My $10k in 0%-fixed I-bonds finally aged out of their 5-yr penalty period last month. During the few times recently (like now) when they've been yielding .1% vs. 0% fixed, has anybody replaced their 0% bonds? Anybody waiting for a better deal? Obviously this only applies to people who have no intention of using up their quota for the year on new-money I-bonds, or people wanting to redeem the bonds within 5 yrs. I'm just curious what others are doing; there is no way to know future rates or which will prove the better strategy in the future. Replacing them would likely reduce my overall I-bond income, since I'd be exchanging (10k + 5 yrs interest) bonds for $10k in new bonds, but it's just annoying to not be getting that extra .1% where it's finally there for the taking.

[Noobvestor]

Over a full thirty years, that .1% is going to amount to around $300 more (nominal, not real) dollars on a $10,000 I Bond. Not much in my book.

Also: what if rates go up more in a year or so, and now you have to sell with a penalty to trade up?

Also: have you done the tax math on cashing out? If you expect to be in a lower bracket in the future, this could go against trading up.

Personally, I buy I Bonds not for the fixed rate but for the variable rate - insurance against inflation.

[z3r0c00l]

I-bonds are at their best after the 5 years, I wouldn't drop it now.

[camaro327]

It comes down to when you want to pay tax on these. However, you could always do a partial redemption, for example sell $5,000 of 0% and buy $5,000 of the 0.1% bonds.

I-bonds are at their best after the 5 years, I wouldn't drop it now.

+1, definitely more flexibility after 5 years.