Quote:
Originally Posted by sweeps
Don't forget the 3 month penalty if you cash out before holding for 5 years. And the minimum 1 year holding period.
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Both true, but keep in mind that depending on your situation and the interest rate trend, even if you cash out before 5 years, you may have earned more than enough on the bond compared to a CD or MMA that the 3 month penalty won't matter.
Also, if you time your purchase correctly, that 3 month penalty becomes only a 1 month penalty. Here's why. When you buy a bond you get credit for that entire month whether you buy on the 1st or the 31st. When you redeem a bond, you get credit for the entire month regardless of the redemption date. So buy your bond at the end of a month and redeem your bond at the beginning of a month and you really only lose 1 month worth of interest.