When I first started working at my job, I got signed up for payroll deduction into EE bonds. I stopped that after some years. The earliest ones will start maturing in 2011.
Right now, these bonds would represent a small portion of my overall bond exposure, about 2.5% of what I have projected for bonds.
Oops, the minimum likely expired. It's a tad complicated. See the site above and sites like
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. They suggest your EE bonds are paying closer to 4% now. Whether to cash in or not is maybe a case of "five will get you ten." Consider that no state tax is due on the interest of EE bonds. (Federal tax will still be owed, though.)
I'd say the EE bonds are close enough to mimicking the bonds used in allocation planning. One of the most famous allocation studies (Trinity U.) used investment grade, long term corporate bonds, which should pay better interest than any Treasury. I'd stick with bonds having no more than about a five year maturity, since these historically "optimize" return and are short enough to offer some flexibility. Going out beyond five years does not result in much higher interest rates.
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