Should I repurchase EE bonds with proceeds from mature EE bonds

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Should I repurchase EE bonds with proceeds from mature EE bonds

Post by offthetop » Tue Aug 13, 2019 9:50 am

31 YO
I have EE bonds that began maturing last year that bring in about $700/yr for the next 25 years.

I am wondering if I should repurchase EE bonds with the proceeds, a bond fund with vanguard or fidelity, or put them into a taxable account and let them do their thing as I am still young..

They are currently about 3% of portfolio and I have about 5% bonds total.

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Re: Should I repurchase EE bonds with proceeds from mature EE bonds

Post by dratkinson » Tue Aug 13, 2019 1:52 pm

Agree you should have more bonds. Probably 25% minimum, just as a precaution so you don't worry too much during the next market correction.

My personal preference is to not buy more savings bonds. But that's just me.

Idea 1A. Use the proceeds for your living expenses, while you use your salary to max your annual tax-advantaged accounts: employer's retirement plan + your IRA. (You want to ensure you get the full employer's match, if any.)

Idea 1B. If you do not have a large EF (emergency fund: 6-12mos of livings expenses in bank checking, savings, CDs,...), then use the proceeds to build up your EF.

Idea 2. If you are maxing your annual TA accounts and have a large EF, then use the proceeds to add to your taxable account. Can buy a multi-duty bond fund that can be used as: (1) an extended tier of your EFs (>1yr of living expenses), as (2) dry powder when stocks go on sale, and as (3) retirement bonds if not used otherwise.

The bond fund you choose to buy will depend upon your fed/state tax brackets---a municipal bond fund may be better for you than a taxable bond fund.

Your choice.

Edit. Suggest reading Swedroe's book, The Only Guide to a Winning Bond Strategy You'll Ever Need.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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