Keep in Government Savings Bonds transfer to Emigrant?

I savings bonds have a penalty if cashed in before 5 years equal to 3 month interest. They are deferrred from federal income tax until the I savings bonds are redeemed, So that redeeming the I savings bonds for deposit in a Bank would be advantageous only if the interest rate is sufficently higher. Of course we do not know what the future interest rates will be, however the I savings bond rate will track inflation rate.

I-Bonds are federal tax deferred until redemption and 100% tax-free if you use the money to pay for a child's college tuitution. I-Bonds are also free from state income taxes. And with the current rates at 3.49%, above Emigrant's 2.96%, you would be much better off keeping it in I-Bonds.

Emigrant allows you more flexibility, in that you can use the money as a revolving cash account with up to 6 withdrawls per month and unlimited deposits. In this way, you can use it to buffer short-term cash needs and you can also add to your savings without buying another I-Bond and locking money for min 12 months.

A combination strategy may be best, keeping your I-bond for permenant savings, and sweeping liquid cash into Emigrant until you need it.

Hang on to the I-bonds. When your rate re-adjusts it will be 3.77% (1.1% above inflation based on when you bought it). Don't cash them until the 5-year period is ended if you can avoid it, and you will recapture the extra three months interest, effectively adding about 1/4% per year to the yield.

Well I would say it reflects the complexity of US tax laws more than the "decilining standards". I have seen accounting majors struggle with them .. and I am just a mere engineer .
FYI I did goto to the IRS website and found something interesting in Pub. 970:

Qualified U.S. savings bonds. A qualified U.S. savings bond is a series EE bond issued after 1989 or a series I bond. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners).

The owner must be at least 24 years old before the bond's issue date. The issue date is printed on the front of the savings bond.

The issue date is not necessarily the date of purchase—it will be the first day of the month in which the bond is purchased.

So I guess i can't claim it against my education expenses since I was 23 when I purchased the bonds .
The purpose of my post was to start a discussion on this so that others who are in position similar to mine ...can discuss and mutually benefit from it. After all, isn't that why people come to FW? (it could be argued that some ppl are just here to FLAME others!!). Every information is available somewhere ELSE .. but ppl come here to know and discuss their situations so that you LEARN something new. I was expecting someone knowledgeable or someone in a similar situation to reply so that we could carry the discussion further! If you aren't interested then simply move on, u don't HAVE to reply.

RallyCap said: A full time graduate student isn't resouceful enough to read www.irs.gov? My, how our educational standards have declined (or is this a CUNY school?)

flygirl1 said: Hang on to the I-bonds. When your rate re-adjusts it will be 3.77% (1.1% above inflation based on when you bought it). Don't cash them until the 5-year period is ended if you can avoid it, and you will recapture the extra three months interest, effectively adding about 1/4% per year to the yield.

I think that the interest rate for the next interest rate period would be 4.70%, from this link.

Edit: This assumes that the fixed rate is 1.1%.

(I don't understand how you figured out the fixed rate from the original post.)