What about rolling over fixed-rate EE bonds?
Thursday, May 11th, 2006
Categorized as: Series EE US Savings Bonds
Can I trade-in my 3.2% EE bonds for the new 3.7% version?
Tom's response
Because you have to hold Savings Bonds for one year, the 3.7% rate will be history by the time you can redeem the 3.2% EEs. Nonetheless, you have the right idea.
You do need to factor in how much money you're dealing with. The difference between 3.2% and 3.7% is 50 cents per year per $100 of investment.
So if what you have is a $50 EE, representing an investment of $25, you'd spend more on gas driving to the bank than you'd earn by making the switch.
On the other hand, if you have an investment of $10,000 that you expect to keep in EEs for 10 years, switching from 3.2% EEs to EEs that paid 3.7% or more would be an easy way to make at least $500.
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I would advise against buying EE bonds in a (still)rising rate environment, especially with the yield curve as flat as it is. If you're using TreasuryDirect, and want to invest in the long run, get a 10 year T bond (the security determining the EE rate). If you want to invest in the short run, get a 6 month T bill which still beats the current EE rate by more than 1%. These have recently become very easy to buy for TreasuryDirect users.