That's interesting. The YTM chart makes me personally less likely to buy EE bonds because if inflation or interest rates rise I would not redeem the EE bonds unless those rates increased above the YTM, which seems unlikely. So if they increase but to less than the EE bond's YTM, I would keep the EE bond but would still get just the overall 3.5% average yield after 20 years.SantaClaraSurfer wrote: ↑Sat Sep 19, 2020 4:41 pmMy bottom line, the YTM on EE Bonds can really work to the benefit of an investor who is around 20 years out from retirement in the current Fixed Income marketplace. Whether the final YTM is 94.1%, 96.238% or a rounded, but inaccurate, 100%, the basic point is same: investors who understand the YTM chart for EE Bonds may well become much more comfortable with creating a bond ladder with them.
I know that is what happened for my wife and I. Once we understood this YTM chart, it clicked and we became more open to EE Bonds as a way to boost our income floor in retirement.
I just think personally if I were to lock in an investment for 20 years, I would want more than 3.5% nominal or would want inflation protection like an I bond. A 10 year MYGA pays 3.6% now and is also tax deferred (not too important at these low rates) but does not have a full faith and credit of the the US government and has different early withdrawal penalties (higher at least in the early years than the effective early withdrawal penalty of almost all the (average 20 year 3.5%) interest of the EE bonds).
New ones in 10 years may pay more or less than that so there is reinvestment risk, but I don't see the yield curve compensating me sufficiently with EE bonds for locking in the money for 20 years instead of 10.
If I have to lock in for 20 years I would rather invest in the total stock market although if one has to withdraw earlier than 20 years one may very well lose principle there, rather than just get back the principle (plus woo hoo 0.1% per year!) like the EE bond.
The other thing is that if the $10k/year/person limit is a small part of one's overall portfolio, I just don't see it moving the needle enough to justify the complexity. Maybe if one wants to contribute that amount or less to an asset class that is less volatile than stocks, tax deferred, and easier than chasing CD yields, and does not re-balance to/from the EE, then it's better than ordinary bonds due to their low yields? Bonds will decrease in value if interest rates rise but they have paid a higher annual dividend that the investor gets to keep unlike EE bonds.
Like I said, that's just me. Others may have different conclusions.