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In addition to I bonds you can also buy up to $10K in EE bonds per year as well. These double in value, but you have to hold on to them for 20 years until they

In addition to I bonds you can also buy up to $10K in EE bonds per year as well. These double in value, but you have to hold on to them for 20 years until they mature. I treat this as as retirement savings. For example, if you buy them when you are between 40 and 50 years old, you will have $200K of risk free money by age 70. Also, both I bonds and EE bonds are tied to the individual. If you are married your spouse can also buy $20K in bonds per year as well.

twblalock 4y ago
The downside of the EE bonds is they don't grow linearly. They are guaranteed to be worth double their original value via a one-time adjustment at the 20 year mark if they haven't already doubled -- and at today's rates they definitely won't double until then. If you need to sell them before the 20th anniversary they will barely be worth more than their original value, and in real terms they will be worth far less because of inflation.
- chii 4y ago
  doubling after 20 years is approx. 5% growth per year (locked in). It's not that great an investment, but it does make sense to use it as a portion of your portfolio for retirement. I would imagine you'd put around 5-10% of your total networth in this form - may be even stagger it over time (e.g., put in 1% every year starting from 40). This can exist in lieu of bonds in your portfolio - though i would perhaps split it 50/50 with your bond allocation (which gives you some liquidity early if you truly need it). I would want to have more invested in equities as their potential for growth is much higher, and over the long term, ought to beat inflation (as long as you purchase a market weighted index).
  - nopzor 4y ago
    more like 3.6% with compounding interest…
    - Thorrez 4y ago
      I get 3.53% >>> 2**(1/20.) 1.0352649238413776
      - nopzor 4y ago
        i didn’t calculate it, i just did the rule of 72 in my head :-)
    - chii 4y ago
      well, the EE bonds aren't compounded (or they compound with an interval of 20 years). That's why i used simple interest rather than compound, so as to make the calculations easier too.
      - hackerfromthefu 4y ago
        This is misleading because everything you compare it to does compound. When people talk about an interest rate, a growth rate, an inflation rate .. everything compounds. If you're saying 5% of some special non compounding thing thats misleading to people without financial literacy to compare to every other rate they read. So it's more correct to say 3.53%.
rrrrrrrrrrrryan 4y ago
That's a 3.6% interest rate with your money locked up for 20 years. Personally, I'd rather risk that in index funds - your money would be much more accessible, the expected return would be greater, and the risk of the investment dive-bombing on a 20 year timeline is rather low. I guess cool that it's guaranteed, though, and might make sense as part of a diversified retirement account.
- hrez 4y ago
  "Minimum term of ownership: 1 year"
- chii 4y ago
  > the risk of the investment dive-bombing on a 20 year timeline is rather low. it's not that the risk is low - it's just that you cannot know if the equities wouldn't fall at the 20 yr mark, just you need to liquidate it to retire. You have to slowly decrease your % of equities the closer you are to retirement.

twblalock 4y ago

The downside of the EE bonds is they don't grow linearly. They are guaranteed to be worth double their original value via a one-time adjustment at the 20 year mark if they haven't already doubled -- and at today's rates they definitely won't double until then. If you need to sell them before the 20th anniversary they will barely be worth more than their original value, and in real terms they will be worth far less because of inflation.

chii 4y ago
doubling after 20 years is approx. 5% growth per year (locked in). It's not that great an investment, but it does make sense to use it as a portion of your portfolio for retirement. I would imagine you'd put around 5-10% of your total networth in this form - may be even stagger it over time (e.g., put in 1% every year starting from 40). This can exist in lieu of bonds in your portfolio - though i would perhaps split it 50/50 with your bond allocation (which gives you some liquidity early if you truly need it). I would want to have more invested in equities as their potential for growth is much higher, and over the long term, ought to beat inflation (as long as you purchase a market weighted index).
- nopzor 4y ago
  more like 3.6% with compounding interest…
  - Thorrez 4y ago
    I get 3.53% >>> 2**(1/20.) 1.0352649238413776
    - nopzor 4y ago
      i didn’t calculate it, i just did the rule of 72 in my head :-)
  - chii 4y ago
    well, the EE bonds aren't compounded (or they compound with an interval of 20 years). That's why i used simple interest rather than compound, so as to make the calculations easier too.
    - hackerfromthefu 4y ago
      This is misleading because everything you compare it to does compound. When people talk about an interest rate, a growth rate, an inflation rate .. everything compounds. If you're saying 5% of some special non compounding thing thats misleading to people without financial literacy to compare to every other rate they read. So it's more correct to say 3.53%.

rrrrrrrrrrrryan 4y ago

That's a 3.6% interest rate with your money locked up for 20 years. Personally, I'd rather risk that in index funds - your money would be much more accessible, the expected return would be greater, and the risk of the investment dive-bombing on a 20 year timeline is rather low. I guess cool that it's guaranteed, though, and might make sense as part of a diversified retirement account.

hrez 4y ago
"Minimum term of ownership: 1 year"
chii 4y ago
> the risk of the investment dive-bombing on a 20 year timeline is rather low. it's not that the risk is low - it's just that you cannot know if the equities wouldn't fall at the 20 yr mark, just you need to liquidate it to retire. You have to slowly decrease your % of equities the closer you are to retirement.