The original thread had petered out, but has been revived with some new blood in the new, now merged thread, and going from 35% tax rate to 0% is a new twist. How do you get to a marginal tax rate of 0% in retirement after being at 35% while working? With a decent savings rate, it's more likely that your marginal tax rate will be at least 25%, especially after RMDs and SS kick in, or if you do Roth conversions before then. I'm at 15% without any Roth conversions, and I do Roth conversions to the top of the 15% bracket, so any more income would be taxed at 25% (federal).jdilla1107 wrote:You are forgetting tax deferral, which makes that gap significantly wider for people who are high tax bracket now and low at retirement. EE bonds expand my tax deferral space somewhat significantly. Try adding a 35% tax rate over that 20 years with 0% in retirement.nisiprius wrote: but anyway, $10,000 for 20 years at 2.69% compounded gets you $17,000 instead of $20,000.
It's possible if you are able to take the qualified educational expense (QEE) exemption on 100% of your EE Bond redemption, but that requires a number of conditions. You must still have kids in school, your income must be below the exemption limit, and you must not have consumed the QEE with education tax credits.
The last one is what got us for 2016. We had used up the AOTC in previous years, and the LLC consumed $10K of QEE, leaving only a small amount of QEE to apply toward our $20+K I Bond redemption. Didn't amount to much tax savings.