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Savings-Bonds-Alert: Convert E bonds to HH?

Thursday, June 24, 2004

Convert E bonds to HH?

My wife and I are both in our early eighties. All of our bonds are E Bonds issued in a five year period from 1974 through 1978. For all years except 2007, I will redeem based on month and year of final maturity. My concern is the year 2007 where we currently as of May 2004, this year, have a total value of $73,951.92 for just this one year 2007. Do you have any idea how I can find out what the rate of interest will be on these 1977 issued E Bonds for the next three years? I need to have some idea what the aformentioned $74K will grow to by end of 2007. Why in the world would I want to convert these 1977 E Bonds to HH Bonds, and tie this money up at 1.5% interest over at least 10 years? Tom's response The current interest rate on E bonds issued in the 1974-1978 period is 4%, except for the ones issued in March and April 1978, which are currently earning just 2.34%. If the general level of rates continues to trend upward, there's a small chance you'll get something better than this. For your calculations on the 1977 bonds, however, 4% is your most likely interest rate. You could redeem some of the 1977 bonds before they mature and move some of that income into earlier years. There's no requirement that you hold them the full 30 years. For example, consider redeeming a few of the 1977 bonds in 2004, 2005, and 2006 to even out your income. Keep in mind that you can reinvest in new Series EE or I bonds. The rate is currently less than the 4% you'll otherwise earn, but the rates adjust every six months. If interest rates continue to go up, as many expect, it will probably be a wash. There's no good reason for you to convert to HH bonds. For more on why this is usually a bad idea, see my analysis of 1.5% Series HH Savings Bonds. Or just click here to open the premier independent web site on Savings Bonds


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