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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35272  
Subject: Re: Savings Bonds EE Date: 1/9/2004 11:04 AM
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"In a rising interest rate environment EE bonds are better and safer than CDs. EE Bonds are liquid after a year and the penalty of 3 months interest is more reasonable than that of most CDs "

If you are laddering, i.e., putting new money into US Savings Bonds or FDIC Guaranteed 5-year CDs (as US Government "safe" savings), this is not true. You will get new interest rates on new CDs and be rolling over old ones every five years. If you do this, it will take about 15-20 years, despending on tax bracket and state taxes, for the tax advantages to add up from US Savings bonds. (Technically, the comparison should be between laddering 5-year treasuries and EE bonds, but 5-year CDs are similar to 5-year treasuries).

If you are just doing a lump sum, you will be better off with EE bonds if interest rates go up enough soon enough during next 5-year period to cover lower starting interest rate. But if you are looking at long term savings, mostly we drip money in slowly.
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