Are you buying EE bonds in 2023?

[toddthebod]

I think EE bonds are for those that would like the money in 20 years and are planning for kids college. I bought some EE bonds 20 years ago that are just doubling now. No educational use, so I don't get the tax break, but doubling over 20 years turned out to be a good deal.

Over a 20 year period the risk of the market being down is nearly zero. I wonder what your ROI would be in sp 500

Do you want to be 75 and find out your retirement account fell 50%, but don’t worry, it will come back when you have no need for money - in 20 years?

That's not what history has shown us. Even if there is a precipitous crash just prior to your twenty year measurement, the previous 19 years more than made up for it.

Example: Counting back 20 years from the nadir of the GFC (March 2009), an investment in total US market in March of 1989 was worth 4x after the 51% drawdown. In fact the worst 20 year period of the S&P 500 in the last sixty or so years (1959-1979) still left you with 3.5x your starting investment.

[spencydub]

I would not buy EE bonds today.

Instead I would buy a 10 year MYGA from A rated insurer paying 5.45% tax deferred. And then bet that I can roll it over into another 10 year MYGA that overall would beat the 3.5% EE return.

Good alternative. But not for early retirement bridge. Are they really paying that right now?

[GreendaleCC]

I would not buy EE bonds today.

Instead I would buy a 10 year MYGA from A rated insurer paying 5.45% tax deferred. And then bet that I can roll it over into another 10 year MYGA that overall would beat the 3.5% EE return.

Good alternative. But not for early retirement bridge. Are they really paying that right now?

Could you say more about how you define an early retirement bridge?

[spencydub]

I would not buy EE bonds today.

Instead I would buy a 10 year MYGA from A rated insurer paying 5.45% tax deferred. And then bet that I can roll it over into another 10 year MYGA that overall would beat the 3.5% EE return.

Good alternative. But not for early retirement bridge. Are they really paying that right now?

Could you say more about how you define an early retirement bridge?

Any income stream you want to start before you can start collecting social security or other pensions. Or before you can access retirement accounts.

[CletusCaddy]

I would not buy EE bonds today.

Instead I would buy a 10 year MYGA from A rated insurer paying 5.45% tax deferred. And then bet that I can roll it over into another 10 year MYGA that overall would beat the 3.5% EE return.

Good alternative. But not for early retirement bridge. Are they really paying that right now?

Could you say more about how you define an early retirement bridge?

Any income stream you want to start before you can start collecting social security or other pensions.

And why would a MYGA not suit that purpose?

[spencydub]

I would not buy EE bonds today.

Instead I would buy a 10 year MYGA from A rated insurer paying 5.45% tax deferred. And then bet that I can roll it over into another 10 year MYGA that overall would beat the 3.5% EE return.

Good alternative. But not for early retirement bridge. Are they really paying that right now?

Could you say more about how you define an early retirement bridge?

Any income stream you want to start before you can start collecting social security or other pensions.

And why would a MYGA not suit that purpose?

Can’t withdrawal before 59 1/2 without 10% penalty. Maybe that’s early for some?

[CletusCaddy]

Good alternative. But not for early retirement bridge. Are they really paying that right now?

Could you say more about how you define an early retirement bridge?

Any income stream you want to start before you can start collecting social security or other pensions.

And why would a MYGA not suit that purpose?

Can’t withdrawal before 59 1/2 without 10% penalty. Maybe that’s early for some?

Maybe. Would still work for age 60-70 to delay SS.

And even the 10% penalty is not so bad. It’s only applied to the earnings. Drops a 10 year 5.3% rate down to a 4.87% rate. Apply state income tax if applicable.

[spencydub]

Could you say more about how you define an early retirement bridge?

Any income stream you want to start before you can start collecting social security or other pensions.

And why would a MYGA not suit that purpose?

Can’t withdrawal before 59 1/2 without 10% penalty. Maybe that’s early for some?

Maybe. Would still work for age 60-70 to delay SS.

And even the 10% penalty is not so bad. It’s only applied to the earnings. Drops a 10 year 5.3% rate down to a 4.87% rate. Apply state income tax if applicable.

Agreed

[TacoLover]

The idea of locking up any significant t amount of money for 20 y for 3.5 percent just makes me nauseous. Or yes I can pull it out at any time but ROI goes to almost zero. I guess it would be like put half in the market and hold half as cash. You get the same benefits and same ROI. For me that approach doesn’t make sense. If you need the money in under ten years it shouldn’t be in equities. If you need the money in twenty years it shouldn’t be in bonds it should be in equities.

All depends on perspective...

If someone is choosing between contributing $10k to EE Bonds or their tax-advantaged accounts, that's a no brainer - tax-advantaged accounts come first!

We've worked and saved hard, living below our means, and growing our careers/income such that we can max out 2X Roth (Backdoor), HSA, 2X 401k, Mega Backdoor Roth, as well as contribute to our taxable every year. Thus the amount that goes into EE & I Bonds is not a "significant" amount of money to us when viewed as a % of annual savings or as a % of our total portfolio.

Ideally, our retirement will last 40+ years - meaning we need money this year, next year, 5 years from now, 10 years from now, etc. That's why it's common for people to have a "balanced" portfolio in retirement.

How you get there differs for people. Yes, EE Bonds require you start that process 20 years in advance - which may not be of interest to everyone. But unless you are 100/0, and stay 100/0 your entire life, at some point you are going to start buying fixed income investments. Those looking at EE Bonds are just considering them as part of that fixed income allocation.

I get it. To my mind money that Hass to be there within the next 3 to 5 years. Can’t be in vehicles with any significant risk. Which means cash equivalents. Presumably these vehicles lose value every day because of inflation. So you don’t want that much there. For money that you need to say under 10 years from now it could be a little up or down, but it can’t be gone. That money has to keep up with inflation. That to my mind is where bonds are useful. But long-term if you were looking at a 40 year retirement Money that you will need 20 or 30 or 40 years from now. Does not need to keep up with inflation. It needs to grow. To my mind bonds are not for growth. They are for keeping up with inflation. So for money that you need a long time from now , say 20 years from now or more, the reason that should be in equities to my mind is because that is money that has to grow not just keep up with inflation.

That is how I look at it at least. I will be the first to admit that I do not know everything and that I am not the sole arbiter of what is right and what is wrong. But that has been how I approach things. I try to keep an open mind, but if not yet found a reason not to execute that plan.

Thank you for this follow up

For the money that you'll need some time between one and 30 years, that you want to keep up with inflation and that is guaranteed to never lose value, I Bonds are the investment that will do the job for you.

Agreed. But if you are looking to hang onto it for 20 or 30 years, it is not a certainty, but nearly a certainty. You will do better having that money in equities. I think it depends on your risk tolerance. It is extremely likely that your return will be better in equities, but not guaranteed. The way EE bonds are guaranteed.

[SantaClaraSurfer]

Yes.

Main reason = Tax Deferred, Fixed Income in taxable serves as a great counter balance to the risk in our portfolio, and we pay a high marginal tax rate.

I looked at Treasury STRIPS in place of EE Bonds, the YTM is a bit higher for sure, but the tax headache would be significant as lately we've been at the maximum Fed tax rate.

(+We already purchase Long Term Treasuries tax deferred inside our 401(k)s.)

Another reason is simplicity.

My wife and I already incorporate Treasury Direct into our investing plan, we're only purchasing amounts that fit in our Trust Account (so below the $10k max per year), and we like the idea of a reliable Fixed Income ladder from years 2040-2060 that can be inherited by our heirs if we're both gone.

Personally, I think they will always keep the terms of EE Bonds and I Bonds to be "more or less" competitive, regret-free savings instruments. So, with that in mind, we were way up on basis points the last three years with EE Bonds, we may be some fair basis points behind this year, but it will likely come out in the wash as the Treasury will modify the terms of EE Bonds over time to keep them competitive.

And when you look at it from a 50,000 ft viewpoint, if your Fixed Income can do 3.5+% guaranteed like EE Bonds do, that's not a horrible place to be. I'll take that deal.

Finally, we put about the same amount that we put into EE Bonds and I Bonds annually into our high risk Factor and Individual Stock portfolio. We are basically doing a mini barbell within our taxable, sandwiched around a Bogleheads Three Fund filling. So, the fact that Treasury Direct investments never go down in value is a plus from that standpoint.

[GreendaleCC]

Yes.

Main reason = Tax Deferred, Fixed Income in taxable serves as a great counter balance to the risk in our portfolio, and we pay a high marginal tax rate.

I looked at Treasury STRIPS in place of EE Bonds, the YTM is a bit higher for sure, but the tax headache would be significant as lately we've been at the maximum Fed tax rate.

(+We already purchase Long Term Treasuries tax deferred inside our 401(k)s.)

Another reason is simplicity.

My wife and I already incorporate Treasury Direct into our investing plan, we're only purchasing amounts that fit in our Trust Account (so below the $10k max per year), and we like the idea of a reliable Fixed Income ladder from years 2040-2060 that can be inherited by our heirs if we're both gone.

Personally, I think they will always keep the terms of EE Bonds and I Bonds to be "more or less" competitive, regret-free savings instruments. So, with that in mind, we were way up on basis points the last three years with EE Bonds, we may be some fair basis points behind this year, but it will likely come out in the wash as the Treasury will modify the terms of EE Bonds over time to keep them competitive.

And when you look at it from a 50,000 ft viewpoint, if your Fixed Income can do 3.5+% guaranteed like EE Bonds do, that's not a horrible place to be. I'll take that deal.

Finally, we put about the same amount that we put into EE Bonds and I Bonds annually into our high risk Factor and Individual Stock portfolio. We are basically doing a mini barbell within our taxable, sandwiched around a Bogleheads Three Fund filling. So, the fact that Treasury Direct investments never go down in value is a plus from that standpoint.

Thanks for this!

[dan7800]

Dumb question.

- An ee in 20 years will return ~ 3.54%
- You can buy a 20 year at 4.1

Why buy an EE (outside of education etc...)?

An EE Bond incurs $0 taxes - until you sell it. In essence, they extend your "tax-advantaged" space.

A 20-year Zero has a tax-drag all 20 years (unless you have access to and space to hold them in a tax-advantaged account, but that means "less space" for other investments).

Excellent post. Thank you very much for the informative response.

[Grt2bOutdoors]

I think EE bonds are for those that would like the money in 20 years and are planning for kids college. I bought some EE bonds 20 years ago that are just doubling now. No educational use, so I don't get the tax break, but doubling over 20 years turned out to be a good deal.

Over a 20 year period the risk of the market being down is nearly zero. I wonder what your ROI would be in sp 500

Do you want to be 75 and find out your retirement account fell 50%, but don’t worry, it will come back when you have no need for money - in 20 years?

That's not what history has shown us. Even if there is a precipitous crash just prior to your twenty year measurement, the previous 19 years more than made up for it.

Example: Counting back 20 years from the nadir of the GFC (March 2009), an investment in total US market in March of 1989 was worth 4x after the 51% drawdown. In fact the worst 20 year period of the S&P 500 in the last sixty or so years (1959-1979) still left you with 3.5x your starting investment.

There is one component missing in your analysis: Behavioral finance is at its worst in market downturns. While you can speak for yourself, historically people run for the hills in poor downturns. My intention as one of several facets is to use the bonds during downturns and hold equity for the duration, however long that might be. As my human capital declines, I am not going “all in” with my financial capital on risk.

As for historical periods, and not sure of your age, first you needed to survive the various recessions along the way. We are shaped by our experiences and ignoring it fully can place one at peril.

[SantaClaraSurfer]

That's not what history has shown us. Even if there is a precipitous crash just prior to your twenty year measurement, the previous 19 years more than made up for it.

Example: Counting back 20 years from the nadir of the GFC (March 2009), an investment in total US market in March of 1989 was worth 4x after the 51% drawdown. In fact the worst 20 year period of the S&P 500 in the last sixty or so years (1959-1979) still left you with 3.5x your starting investment.

There is one component missing in your analysis: Behavioral finance is at its worst in market downturns. While you can speak for yourself, historically people run for the hills in poor downturns. My intention as one of several facets is to use the bonds during downturns and hold equity for the duration, however long that might be. As my human capital declines, I am not going “all in” with my financial capital on risk.

As for historical periods, and not sure of your age, first you needed to survive the various recessions along the way. We are shaped by our experiences and ignoring it fully can place one at peril.

Behavioral finance is important.

I just took a two-week vacation. I didn't look at the markets once, and didn't much care what equities did or didn't do when I came back. There was no urgency to do anything. For me, that's the power of having an appropriate amount of Fixed Income: my wife and I should be able to do what we've planned to do and not worry about the markets impacting our spending plans. We enjoy the benefits of a diverse portfolio with appropriate levels of risk, now, and into retirement.

Someone who is 20 years from retirement and has a $1,000,000 portfolio and is 80/20 equities to bonds, has $800,000 in equities and $200,000 in bonds. That's hardly a small amount in stocks! But it's also an amount in bonds that's worth learning and thinking about.

Say their portfolio triples, and increases to $3,000,000 over those twenty years and they slowly move to a 60/40 equity to bond ratio as they near retirement. That's hardly a conservative position! But that means they will be holding $1,800,000 in equities at retirement and $1,200,000 in bonds. That's a sizable equity position.

However, over the intervening 20 years, this person will have purchased $1,000,000 in new bonds, about $50,000 per year, simply by moving from 80/20 to 60/40.

If Fixed Income is part of your planning, you are going to be buying a lot of bonds as you glide path to retirement. Either that, or you are planning to hold onto maximum equity risk until you are very close to retirement age, and then purchase an allocation to Fixed Income all at once. (I don't see the appeal in that approach as it is dependent on equity market value at a specific sale date.)

My take would be to purchase bonds slowly, steadily, and increasingly along the way, and enjoy spending your money in all the phases of your retirement journey. I am definitely in favor of investors taking time to learn about the right Fixed Income vehicles for their needs and where their appropriate level of risk sits. My views have changed and grown along the way, and I hope for the better.

I think OP is right to see what people who are using EE Bonds as a savings vehicle think about the investment.

One thing to note is that many Fixed Income investments have significant minimum purchases, however, EE Bonds and I Bonds can be purchased (and sold) for as little as $25 increments, and can be bought via an automated plan, as well.

People often talk about buying $10,000 in Fixed Income all at once here, but I frequently make a monthly purchase, for example, of I Bonds + CA Tax Free Muni (via a mutual fund) that is much smaller.

If I had $1088.22 for Fixed Income in Taxable for a given month, I might buy, say, $350 of I Bonds and $738.22 of the Muni Mutual Fund. No need to lose a penny of it.

(I do try to save up to purchase bigger whole chunks of EE Bonds. Like $2,000 or $4,000 or $6,000.)

In my view, it all adds up, and the slow and steady approach should serve us well.

[TacoLover]

I think EE bonds are for those that would like the money in 20 years and are planning for kids college. I bought some EE bonds 20 years ago that are just doubling now. No educational use, so I don't get the tax break, but doubling over 20 years turned out to be a good deal.

Over a 20 year period the risk of the market being down is nearly zero. I wonder what your ROI would be in sp 500

Do you want to be 75 and find out your retirement account fell 50%, but don’t worry, it will come back when you have no need for money - in 20 years?

That's not what history has shown us. Even if there is a precipitous crash just prior to your twenty year measurement, the previous 19 years more than made up for it.

Example: Counting back 20 years from the nadir of the GFC (March 2009), an investment in total US market in March of 1989 was worth 4x after the 51% drawdown. In fact the worst 20 year period of the S&P 500 in the last sixty or so years (1959-1979) still left you with 3.5x your starting investment.

There is one component missing in your analysis: Behavioral finance is at its worst in market downturns. While you can speak for yourself, historically people run for the hills in poor downturns. My intention as one of several facets is to use the bonds during downturns and hold equity for the duration, however long that might be. As my human capital declines, I am not going “all in” with my financial capital on risk.

As for historical periods, and not sure of your age, first you needed to survive the various recessions along the way. We are shaped by our experiences and ignoring it fully can place one at peril.

For me I started around 2000 but didn’t have much to invest back then. I just keep putting money in every paycheck. During the first Covid drop I took a little more money out of my business and invested more every day during the drop. I remember the day the drops ended bec I said to myself “that’s it I can’t take it anymore. I’m not selling but I’m not putting more in.” That was the nadir. Maybe April? This year I’ve done the same but less aggressively. I’m annoyed at the market but not planning on retiring for a while.

His point was my thought - I was just too lazy to look it up - that if you’re holding it for 20 y you are so likely to do so much better that even if there’s a 50 pct drop you’ll STILL be ahead.

Again to my mind you need growth in your portfolio. Equities are more volatility but more growth. That’s where you find your growth. Bonds are less volatility and less growth. To my mind the job of bonds is to keep up with inflation not grow your portfolio. That’s why I don’t have ee bonds. If you have to hold them for 20 y I’d rather anticipate more growth than 3.5 percent.

[SantaClaraSurfer]

That’s why I don’t have ee bonds. If you have to hold them for 20 y I’d rather anticipate more growth than 3.5 percent.

Understood, but 3.5% for Fixed Income over 20 years compares strongly to many recent issue I Bond returns or even 20 year Treasury rates for most of the decade prior to their recent rate increases.

Despite the recent CPI inflation, an I-Bond from April of 2004 with a Fixed 1.1% rate comes in at a 3.7% overall return in October of 2023. (I-Bonds do provide 30 years of inflation protection, however, it must be said, so there's another 10 years or so for this story to write itself.)

An I-Bond from April of 2010 with a Fixed rate of .3% is rolling along with a 2.83% return as of this October. (April 2010 20 Year Treasuries had rates @4.5-4.6%.)

[GreendaleCC]

That’s why I don’t have ee bonds. If you have to hold them for 20 y I’d rather anticipate more growth than 3.5 percent.

Understood, but 3.5% for Fixed Income over 20 years compares strongly to many recent issue I Bond returns or even 20 year Treasury rates for most of the decade prior to their recent rate increases.

Despite the recent CPI inflation, an I-Bond from April of 2004 with a Fixed 1.1% rate comes in at a 3.7% overall return in October of 2023. (I-Bonds do provide 30 years of inflation protection, however, it must be said, so there's another 10 years or so for this story to write itself.)

An I-Bond from April of 2010 with a Fixed rate of .3% is rolling along with a 2.83% return as of this October. (April 2010 20 Year Treasuries had rates @4.5-4.6%.)

Thanks, I would not have expected those results

[TacoLover]

That’s why I don’t have ee bonds. If you have to hold them for 20 y I’d rather anticipate more growth than 3.5 percent.

Understood, but 3.5% for Fixed Income over 20 years compares strongly to many recent issue I Bond returns or even 20 year Treasury rates for most of the decade prior to their recent rate increases.

Despite the recent CPI inflation, an I-Bond from April of 2004 with a Fixed 1.1% rate comes in at a 3.7% overall return in October of 2023. (I-Bonds do provide 30 years of inflation protection, however, it must be said, so there's another 10 years or so for this story to write itself.)

An I-Bond from April of 2010 with a Fixed rate of .3% is rolling along with a 2.83% return as of this October. (April 2010 20 Year Treasuries had rates @4.5-4.6%.)

True. But you only get 3.5 if you hold it for twenty years. If I’m going to hold something for twenty years that means I need growth not keeping up with inflation so anything I have to keep twenty years is in equities for me. I get what you’re saying tho - you are seeing that as income/bonds whereas for me bonds is short to medium term just to keep up with inflation. For me long term is for growth. I appreciate your view tho.

[TacoLover]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

[TacoLover]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

Yahoo finance must not include dividends? Weird. Portfolio visualizer for the same time period gives 9.5 Cagr qqq, 7.4 sp500 and 8.0 vtsax.

[GreendaleCC]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

You are the only person in this thread trying to compare the return of EE bonds to the S&P 500. No one has asserted that EE bonds would have the same performance as the S&P 500.

[TacoLover]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

You are the only person in this thread trying to compare the return of EE bonds to the S&P 500. No one has asserted that EE bonds would have the same performance as the S&P 500.

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

[GreendaleCC]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

You are the only person in this thread trying to compare the return of EE bonds to the S&P 500. No one has asserted that EE bonds would have the same performance as the S&P 500.

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

Thanks for letting us know.

[CletusCaddy]

Weird. Maybe I’m looking at it wrong. 1/1/00-1/1/20 includes 2000 dot com crash, 2008 and 2018. Total return 139 percent qqq and 101 sp500. So ee bought around the time of the dot com bubble gives about same results as sp500? Inwould not have expected that. This is on yahoo finance. I wonder if it includes dividends. I would have expected much better returns for equities.

You are the only person in this thread trying to compare the return of EE bonds to the S&P 500. No one has asserted that EE bonds would have the same performance as the S&P 500.

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

Here is a test of your risk tolerance.

Let’s say you had these two options:
1. Holding something guaranteed to return 10% CAGR over 20 years.
2. Holding something that on average has delivered 10% CAGR over 20 years, but with huge potential drops along the way.

Obviously everyone would pick #1.

Now what if #1 was paying 8%? Would you still pick that over #2? I think most people would.

Now what about 5% guaranteed? How many people would now pick #2?

This is how differing risk tolerances work. Different people will drop off at different points.

[GreendaleCC]

People buying EE bonds for their doubling effect 20 years later also expect that their equity investments will likely (hopefully!) experience growth greater than 100% over 20 years. Full stop. The end. Let's move on.

If you're buying EE bonds in 2023, I'm curious to hear your thought process. Great replies so far (mostly).

[Save2Survive]

I am buying EE bonds for building a bridge to SS at 70. I am also buying I bonds as well. Hope to retire no later than 65, so I will need to cover those 5 years partially with the EE bonds.

In addition to this, I will consider extending the bridge to 75, when I will need to start RMDs. I will need to think about this more, it's just a secondary consideration.

If I can sustain my current job/income till close to retirement, then the DIY annuity (buy EE bonds till 70), is another consideration.

But main objective is bridge to SS at 70.

[SnowBog]

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

How many years are there between the time that you added (or will add) fixed income to your portfolio (aka you are something other than 100/0) and your end of plan?

I bet it's more than 20... (Unless you are - and plan to stay - 100/0...)

For myself, if I include "uninvested cash" , it's basically since I started earning money — let's call it 80 years if I live to 100.. If I limit myself to "knowingly investing in bonds/fixed income", that started around age 40 when I discovered Bogleheads, learned what bonds are, and why I should hold some - so let's call that 60 years (simple math living to 100).

By choosing to hold bonds/fixed income - I'm committing to holding them for life. I've grown the amount of bonds/fixed income as we approach financial independence and retirement.

So your "commitment to hold for 20 years" is meaningless to me... I'm committed to hold bonds/fixed income for the remainder of my life. I'll be holding bonds much longer than 20 years - whether I buy EE Bonds or not...

Given that, your argument that equities might out perform EE Bonds (or any other fixed income for that matter) is meaningless. Again, I've already decided that 100/0 does not make sense for our portfolio and where we are in life. So the question (as it relates to OP) becomes do EE Bonds serve a place within my fixed income allocation

What the OP, myself, and others are trying to explain, is if you want to argue the merits of being 100% equities (aka no bonds of any kind including EE Bonds), there are plenty of other threads you can do so. The intention (as I understood it) of the OP was to focus this thread on if EE Bonds make sense within your fixed income in the year 2023 (when other options exist due to higher rates). Arguing about something that isn't a fixed income option misses the entire point of the thread...

[GreendaleCC]

The intention (as I understood it) of the OP was to focus this thread on if EE Bonds make sense within your fixed income in the year 2023 (when other options exist due to higher rates). Arguing about something that isn't a fixed income option misses the entire point of the thread...

Bonus points!

[TacoLover]

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

How many years are there between the time that you added (or will add) fixed income to your portfolio (aka you are something other than 100/0) and your end of plan?

I bet it's more than 20... (Unless you are - and plan to stay - 100/0...)

For myself, if I include "uninvested cash" , it's basically since I started earning money — let's call it 80 years if I live to 100.. If I limit myself to "knowingly investing in bonds/fixed income", that started around age 40 when I discovered Bogleheads, learned what bonds are, and why I should hold some - so let's call that 60 years (simple math living to 100).

By choosing to hold bonds/fixed income - I'm committing to holding them for life. I've grown the amount of bonds/fixed income as we approach financial independence and retirement.

So your "commitment to hold for 20 years" is meaningless to me... I'm committed to hold bonds/fixed income for the remainder of my life. I'll be holding bonds much longer than 20 years - whether I buy EE Bonds or not...

Given that, your argument that equities might out perform EE Bonds (or any other fixed income for that matter) is meaningless. Again, I've already decided that 100/0 does not make sense for our portfolio and where we are in life. So the question (as it relates to OP) becomes do EE Bonds serve a place within my fixed income allocation

What the OP, myself, and others are trying to explain, is if you want to argue the merits of being 100% equities (aka no bonds of any kind including EE Bonds), there are plenty of other threads you can do so. The intention (as I understood it) of the OP was to focus this thread on if EE Bonds make sense within your fixed income in the year 2023 (when other options exist due to higher rates). Arguing about something that isn't a fixed income option misses the entire point of the thread...

Oh I understand. At the beginning I thought he was asking if it makes sense to buy ee at all. My point as you mentioned has always been ee more or less requires holding for 20 years. You are not guaranteed but extremely likely to have a better outcome holding any financial vehicle for 20 years in equities rather than bonds. I’ve said the same thing several times. Eventually I realized he is not asking us it a good idea to buy ee And hold for 20 years but rather if you are buying bonds to hold for 20 years, is Ee appropriate? I would argue that if your risk tolerance is moderate and not low you are better off with equities not bonds. But I realize now that was not his question. His question is - as I understand - if you’re looking at holding income/bonds for a long period of time is ee appropriate? It’s not for me but it is for people who want to hold bonds for 20 years.

[TacoLover]

Ee bonds require you hold them for 20 y to get the 3.5. If you sell early you don’t get that. My point was if you are obligating yourself to holding an investment vehicle for 20 y - equities is probably a better choice.

How many years are there between the time that you added (or will add) fixed income to your portfolio (aka you are something other than 100/0) and your end of plan?

I bet it's more than 20... (Unless you are - and plan to stay - 100/0...)

For myself, if I include "uninvested cash" , it's basically since I started earning money — let's call it 80 years if I live to 100.. If I limit myself to "knowingly investing in bonds/fixed income", that started around age 40 when I discovered Bogleheads, learned what bonds are, and why I should hold some - so let's call that 60 years (simple math living to 100).

By choosing to hold bonds/fixed income - I'm committing to holding them for life. I've grown the amount of bonds/fixed income as we approach financial independence and retirement.

So your "commitment to hold for 20 years" is meaningless to me... I'm committed to hold bonds/fixed income for the remainder of my life. I'll be holding bonds much longer than 20 years - whether I buy EE Bonds or not...

Given that, your argument that equities might out perform EE Bonds (or any other fixed income for that matter) is meaningless. Again, I've already decided that 100/0 does not make sense for our portfolio and where we are in life. So the question (as it relates to OP) becomes do EE Bonds serve a place within my fixed income allocation

What the OP, myself, and others are trying to explain, is if you want to argue the merits of being 100% equities (aka no bonds of any kind including EE Bonds), there are plenty of other threads you can do so. The intention (as I understood it) of the OP was to focus this thread on if EE Bonds make sense within your fixed income in the year 2023 (when other options exist due to higher rates). Arguing about something that isn't a fixed income option misses the entire point of the thread...

Also if you’re 20 years old and not planning on retiring for over 40 years from now I’d argue that holding any bonds is only appropriate if your risk tolerance is very very small. At 20 with a 40 y period before retirement you don’t need mo at that only keeps up with inflation. You need money to grow. In that case I’d argue unless your risk tolerance is very very small you should be 100/0. Otherwise you’ll find your best egg did not take sufficient advantage of the market over long time periods and you don’t have enough to retire. The closer you get to retirement the less volatility you can tolerate so as you get closer to retirement that’s when you transition to less volatile vehicles. Growth is for money you need a long time from now - say over 15 y. Income to my
Mind or decreased volatility is what you need closer to the future. I’m over 50 and still around 90/10. Maybe 95/5. But I love my work and have no plans to retire in the near future (G-d willing). I should probably start transitioning to a little more conservative portfolio admittedly.

[GreendaleCC]

I’m over 50 and still around 90/10. Maybe 95/5. But I love my work and have no plans to retire in the near future (G-d willing). I should probably start transitioning to a little more conservative portfolio admittedly.

Yes, something for you to consider.

[Makefile]

People buying EE bonds for their doubling effect 20 years later also expect that their equity investments will likely (hopefully!) experience growth greater than 100% over 20 years. Full stop. The end. Let's move on.

If you're buying EE bonds in 2023, I'm curious to hear your thought process. Great replies so far (mostly).

I haven't bought one since receiving one in childhood, but I just mention we get two more "bites at the apple" in 2023 as far as the EE fixed rate, currently 2.1%, as it will change in both May and November. The closer it gets to 3.5% the lower the "early withdrawal penalty" if you redeem before the 20-year mark. Also, just by shifting around a few months in 2023, you control what rate you will receive on the doubled value in the final ten years before the 30-year maturity, and perhaps the fixed rate you lock in will be an appealing rate at that time. I suspect it's a safe assumption that the fixed rate is going to be higher in May, and then you could wait until October and perhaps then gamble whether the rate will increase again in November, or go ahead and max out the $10,000 in annual space in October.

[GreendaleCC]

I suspect it's a safe assumption that the fixed rate is going to be higher in May, and then you could wait until October and perhaps then gamble whether the rate will increase again in November, or go ahead and max out the $10,000 in annual space in October.

Please tell us more about this suspicion.

[Makefile]

I suspect it's a safe assumption that the fixed rate is going to be higher in May, and then you could wait until October and perhaps then gamble whether the rate will increase again in November, or go ahead and max out the $10,000 in annual space in October.

Please tell us more about this suspicion.

We don't know exactly how the Treasury sets the Series EE rate. But just as many suspect the Series I fixed rate is influenced by the five-year TIPS yield, I'm going to make an educated guess that the Series EE rate is influenced by the five-year Treasury yield. In fact, before 2005 when Series EE bonds had a variable rate instead of a fixed one, the rate was explicitly tied to either 85% or 90% (depending on the issue date) of the average five-year yield over each six-month period before the bond matures.

Taking a look at the daily Treasury par yield curve rates from the chart here (https://home.treasury.gov/policy-issues ... statistics) I estimate the five-year yield to have run around 3.09% between April 2022 through September 2022, and 3.94% between October 2022 and today. So, I suspect it's highly likely the EE rate will go up rather than down, but I also don't think it will hit 3.5% to reduce the 20-year doubling period any.

[GreendaleCC]

I suspect it's a safe assumption that the fixed rate is going to be higher in May, and then you could wait until October and perhaps then gamble whether the rate will increase again in November, or go ahead and max out the $10,000 in annual space in October.

Please tell us more about this suspicion.

We don't know exactly how the Treasury sets the Series EE rate. But just as many suspect the Series I fixed rate is influenced by the five-year TIPS yield, I'm going to make an educated guess that the Series EE rate is influenced by the five-year Treasury yield. In fact, before 2005 when Series EE bonds had a variable rate instead of a fixed one, the rate was explicitly tied to either 85% or 90% (depending on the issue date) of the average five-year yield over each six-month period before the bond matures.

Taking a look at the daily Treasury par yield curve rates from the chart here (https://home.treasury.gov/policy-issues ... statistics) I estimate the five-year yield to have run around 3.09% between April 2022 through September 2022, and 3.94% between October 2022 and today. So, I suspect it's highly likely the EE rate will go up rather than down, but I also don't think it will hit 3.5% to reduce the 20-year doubling period any.

Thank you!

[monkeydluffy]

Also if you’re 20 years old and not planning on retiring for over 40 years from now I’d argue that holding any bonds is only appropriate if your risk tolerance is very very small. At 20 with a 40 y period before retirement you don’t need mo at that only keeps up with inflation. You need money to grow. In that case I’d argue unless your risk tolerance is very very small you should be 100/0. Otherwise you’ll find your best egg did not take sufficient advantage of the market over long time periods and you don’t have enough to retire. The closer you get to retirement the less volatility you can tolerate so as you get closer to retirement that’s when you transition to less volatile vehicles. Growth is for money you need a long time from now - say over 15 y. Income to my
Mind or decreased volatility is what you need closer to the future. I’m over 50 and still around 90/10. Maybe 95/5. But I love my work and have no plans to retire in the near future (G-d willing). I should probably start transitioning to a little more conservative portfolio admittedly.

I plan on jumping into EE Bonds and I Bonds this year simply because I don't have any more tax-advantaged spaces left. My Roth IRA and government 457 accounts are already 100% in equities (67% US, 33% international). I figured that I need to exhaust all tax-advantaged spaces first even though they don't yield as much money as equities. That being said, once the EE/I bond space is exhausted for the year AND I still have extra money that's not doing anything, then I will go back to buying more VTI and VXUS in a taxable brokerage account.

[CletusCaddy]

Also if you’re 20 years old and not planning on retiring for over 40 years from now I’d argue that holding any bonds is only appropriate if your risk tolerance is very very small. At 20 with a 40 y period before retirement you don’t need mo at that only keeps up with inflation. You need money to grow. In that case I’d argue unless your risk tolerance is very very small you should be 100/0. Otherwise you’ll find your best egg did not take sufficient advantage of the market over long time periods and you don’t have enough to retire. The closer you get to retirement the less volatility you can tolerate so as you get closer to retirement that’s when you transition to less volatile vehicles. Growth is for money you need a long time from now - say over 15 y. Income to my
Mind or decreased volatility is what you need closer to the future. I’m over 50 and still around 90/10. Maybe 95/5. But I love my work and have no plans to retire in the near future (G-d willing). I should probably start transitioning to a little more conservative portfolio admittedly.

I plan on jumping into EE Bonds and I Bonds this year simply because I don't have any more tax-advantaged spaces left. My Roth IRA and government 457 accounts are already 100% in equities (67% US, 33% international). I figured that I need to exhaust all tax-advantaged spaces first even though they don't yield as much money as equities. That being said, once the EE/I bond space is exhausted for the year AND I still have extra money that's not doing anything, then I will go back to buying more VTI and VXUS in a taxable brokerage account.

There is no such thing as running out of tax advantaged space. You can put unlimited money into variable annuities (for equities) or MYGAs (for fixed income).

[watchnerd]

Nope, instead I'm buying TIPS