Cash in or hold on?

Discussion of the Cash portion of the Permanent Portfolio

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pplooker

Cash in or hold on?

Post by pplooker » Sun May 09, 2010 5:06 pm

Well it's not an earth shattering decision but I thought this could be fun to discuss.

I've less than $1500 face value left in EE bonds that I bought circa 2003 which earn... 2.06%

So it's not like it's a lot of money in the grand scheme of life, but here's my dilemma.  I've an opportunity to use the bonds for qualifying tuition so I would not have to report the interest as income on my 1040 next year.

Were I to do this, I would simply take the cash I was going to spend from the savings account in question and buy I bonds with that money and use the bond proceeds for the tuition bill. 

It's equivalent to cashing out the EE bonds and buying I bonds with the proceeds but not having to pay taxes on the interest.  But it's such a small amount of interest really, and I'm currently in a very modest tax bracket, it's not as if it represents some tremendous savings, and having anything that's as safe as an EE bond that earns 2% in this low interest rate environment is hard to give up.

Still I've resolved to buy no more EE bonds, not because I think they're bad but because I feel a combination of I bonds for cash I don't need right now and Money Markets, savings accounts, etc. to keep cash I do need right now available are adequate for my needs.  Why add something extra?  And it's not like holding it adds much meaningful diversification to my cash.

Still, I feel weird about cashing it in when it's a guaranteed 2% and Vanguard Prime is paying around 0.01% with no foreseeable increase in yield in sight.
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MediumTex
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Re: Cash in or hold on?

Post by MediumTex » Sun May 09, 2010 7:45 pm

I would hang on to the bonds. 

Hanging on to things in life (other than worthless junk) is harder to do than it sounds.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
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