Cashing in the I Bonds

After some deliberation, I’ve decided to start cashing in the I Bonds I purchased a year or so ago. It’s not that I don’t think they are good investments, they just don’t fit my needs right now.

First off, due to the purchase of our new house, our not having sold the old house and buying a car for cash a few months ago we’re carrying some debt outside our mortgage for the first time in over a year. I’ve recently paid off our HELOC with what is essentially 0% money but am not charging it up again to pay off one of the 0% balances (which I hope to get again and pay the HELOC back down.) I am also getting ready to apply for some new credit lines (to use for 0% balance transfers) and need to get my overall credit card utilization down to have the best shot at acceptance. In order to give us some flexibility and more cash to work with I’ve decided that instead of rolling our I Bonds over into new ones with a slightly higher fixed interest rate we’ll take the cash and put it to work. So as of today, my Treasury Direct account looks like this.

I’ll be entering redemption requests for the other four I Bonds on or about the 1st of the month that they turn one year old. By redeeming before the bonds are 5 years old I am sacrificing 3 months’ worth of interest. This is a good time to do this however as I’ll be giving up 2% interest for 3 months. With the higher yield in the previous six months, the fact that the bonds are really closer to 11 months old and their exemption from state taxes (really not a big deal in Illinois) I’ll still net close to 5% for the year I’ll hold them.

Once our house in Michigan does sell, I will very likely start over and once again build a ladder of I Bonds. I still think they can be an important portion of our retirement portfolio, providing stable income to supplement our other sources. I just have better uses for the funds now. I also have a $2,000 CD at Netbank that comes due in March, I’ll likely be cashing that in as well.

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