Considering Series I bonds
I recently left HSBC Direct due to interest rates that were nothing special and an ugly interface. My new choice, a money market fund at Vanguard, really isn’t all that different in terms of the rates I’m getting, but I like having my money there.
It seems what is hot this month in the pf blog world is Series I Savings Bonds. Xin Lu at Wisebread posted a great article about them yesterday . E.C. and Ms. MiniDucky recently talked about purchasing them, and the always informative Jonathan at MyMoneyBlog spelled out the details of them as well.
If I buy before the end of April (on the 30th, if possible), my one year yield will be roughly 4.04%. There is a mentions of 4.44% yield for those in high tax states (that’s me!) but it seems the exact rate depends on whether or not you itemize your state taxes (I don’t).
The only downside I see is I’d lose all liquidity. This means I won’t put my entire efund (almost 10k now!) in these bonds (which is the limit: 5k online and 5k paper), but it seems like a reasonable investment for a solid chunk of it. Is it too scary to lock away half of my cash reserves?
I tried to open a Treasury Direct account, just in case. They need me to mail in some sort of form to prove my identity, so perhaps I’ll go the old school route and just get them from my bank. I’m going to think about it for a few days, and if I decide it is a go, I’ll buy on April 30th.
What do you think? Is it even worth it? The difference in interest is currently only about 2% (so, on $5000, about $200 a year) and I lock away my money for a whole year.