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Keep savings bonds with great rate

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Dear Dr. Don,
I purchased $10,000 in Series I savings bonds some time back. How do I know a good time to cash them in? Do you have to keep them for a certain amount of years? Can you give some helpful info?
— Tam Timing

Dear Tam,
Savings bonds, Series EE and Series I, have a minimum holding period of one year, although there is an exception for disaster victims. If you redeem the bonds within the first five years, you lose the last three months of interest earnings as an early redemption penalty.

Series I savings bonds earn a fixed-rate component and a variable rate based on inflation, as measured by the Consumer Price Index. The fixed-rate component remains the same over the bond’s life, but the inflation component changes every six months. The new rates are announced in May and November.

The early issuances of the Series I savings bonds have very attractive fixed-rate components, and you shouldn’t cash in one of these savings bonds unless you must have the money. That’s true even though the current negative inflation rate has all Series I savings bonds earning zero percent over their next six-month interest earning period.

By knowing when you bought the bonds, you can look up the fixed-rate component on the TreasuryDirect Web page “I Savings Bonds Rates & Terms.” You should also download the “Savings Bond Wizard” from the TreasuryDirect Web site to keep track of your savings bond portfolio.

If you have a great fixed rate on your Series I savings bond and you don’t need the money, I’d stay with it despite the prospect of earning zero percent over the next six months. The way the U.S. government is spending taxpayer money, the inflation rate won’t stay negative for long.

Of course, letting the Series I savings bond(s) earn zero percent interest for three months makes losing the last three months of interest a lot less painful if your Series I bonds are less than 5 years old.