https://www.treasurydirect.gov/savings- ... and-later/i wonder how the treasury determines the 2.7% annual rate.EE bonds are useful for high earners who need more tax deferred space. They generate 2.7% annually (tax deferred) if you sell before 20 years. If you hold for 20 years, then you get 3.5% annually (tax deferred). But you aren’t required to hold for 20 years as many on this thread seem to imply.
Basically, however they want to...Here’s how we set the interest rate for these EE bonds
For an EE bond you already own that we issued since May 2005, the interest rate is already fixed (at least for the first 20 years of the bond's life).
Each May 1 and November 1, we set the interest rate for all EE bonds we’ll sell in the following six months.
To set the interest rate, we take market yields and adjust them to account for components that are unique to savings bonds. Examples of those unique components: The fact that we let you cash the bond after you have had it for one year and the fact that you can wait to pay taxes until you cash the bond (which could be 30 years after you buy it).
For myself, I don't really care... I'm holding them for 20 years to hit that "doubling" point, which works out to a guaranteed 3.527% average annual return (but only when held for 20-years).
If you aren't committed to hold for 20-years, IMHO EE Bonds aren't a good fit for you... The rates for those first 20 years will be much lower... IIRC many of mine are 0.1%. Different rates change how much that "last day" (9 years and 364 days) contributes, the lower the rate more it adds (the higher the rate the less it adds). But I highly doubt the rate will ever be "competitive" on its own. (Unless the alternates have negative yields, which make the lowest EE rate of 0% "attractive"... Or so some might say...)
To me, it's that guaranteed 3.527% average annual return that gives the EE Bonds their DIY Annuity characteristics, regardless if what it's rate is.
Statistics: Posted by SnowBog — Wed Oct 09, 2024 9:32 pm