I've been looking over bond options in taxable accounts and there doesn't seem to be much out there that's tax-deferred - essentially EE and I bonds. I'm not excited about EE bonds, at the current rates I'm surprised they can sell them. But I bonds look interesting.
The good news: They fluctuate with inflation like TIPS. They are state tax free, federal tax-deferred, and federal tax free if used for education.
The bad news: the fixed portion is currently a rather low 1.4% (2.8% annually, 4.5% total), and they can't be accessed for 1 year after purchase.
I'd like to use them triple duty: 1) as part of our cash reserves if our emergency fund ever becomes depleted, 2) to defray collage costs (already have a 529), 3) if not used for #1 or #2, then as part of our retirement portfolio (already fund 401k/IRA).
The yield on I bonds is low, but it's better then some money market funds when taking taxes for #2 and #3 into account. And this is a relatively modest sum, so we couldn't ladder munis (and I'm not all that comfortable with them anyway).
What do you think? Do I bonds look good here? Am I missing some other option?