3 ms·

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 m

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 5y 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 5y ago
  more like 3.6% with compounding interest…
  - Thorrez 5y ago
    I get 3.53% >>> 2**(1/20.) 1.0352649238413776
    - nopzor 5y ago
      i didn’t calculate it, i just did the rule of 72 in my head :-)
  - chii 5y 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 5y 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%.

chii 5y 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 5y ago
more like 3.6% with compounding interest…
- Thorrez 5y ago
  I get 3.53% >>> 2**(1/20.) 1.0352649238413776
  - nopzor 5y ago
    i didn’t calculate it, i just did the rule of 72 in my head :-)
- chii 5y 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 5y 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%.