IMO, I-bonds will keep up with or exceed inflation long term...MMF will not. So IMO, consider if you are willing to keep some/all/most of your EF in Ibonds. If so, you can't hop in and out of them frequently due to the aging required for access. They are a better place to park cash long term IMO. Interest is deferred as well, so another benefit.
I suppose it depends on the amount of cash one is looking to have in the EF. In the vicinity of 20k or 40k for a couple you can hop in/out relatively quickly. If you can get some with a fixed rate in the 2-3% range someday then hopping out becomes significantly less attractive, but I'm guessing 95% of people have 0% ones at the moment. As inflation fades, those 95% are at some point going to be literally throwing away money by staying in I-bonds instead of moving to risk-free MMF.
In response to the bolded....not really. It takes a year to be able to access money put into Ibonds, so you can't really hop in and out of them with money that you need access to in an emergency. That's why, for now, I'm ok with sitting tight with my I-bonds. I think they are a better place to park cash for the long haul.
I don't think so. My older I bonds have a 0% base rate, and so are rolling into a~3.5% rate now. While my savings account yield 4.3%, and MM funds > 5%. I will liquidate some I bonds soon and put them in HYSA, at least for a while. If the base rate on the bonds goes up I might get some some more. But I also don't put the max in every year, as I don't want that much in bonds/cash.
When you say "I don't think so", is this in regards to my bolded "I think they(I-bonds) are a better place to park cash for the long haul"? You mentioned that the current rate on MMF is >5%. Is it your contention that the current rate on MMF being >5% makes them a better place to hold cash *long term* than I-bonds?
Looking back:
Initial $10,000 purchase in either I-bonds or a MMF 20 years ago, here is the ~present value:
I-bonds: $23,692
MMF: $13,156
Obviously, we have no way to predict the future value of $10k purchased in both at todays rates. But, we invest in index funds based on the historical return of the stock market. I-bonds seem to have faired significantly better since their inception compared to MMF's.
2006 to present:
Ibonds $18,916
MMF $12,459
Unless I am mistaken, Ibonds come out further ahead than this since MMF returns are taxed yearly both federal and state. Ibonds are state exempt, and federal deferred.
Maybe it makes sense to transition into the higher fixed rate I-bonds rather than holding 0% forever?
To be clear, I'm not definitively arguing that I-bonds are the uncontested winner for where to park one's EF. I do think folks may be over simplifying and perhaps missing the forrest for the trees? 5% IMO is not a clear advantage when it is transitory, subject to state and federal withholding, subject to a penalty of cashing out Ibonds in order to get the MMF rate, and based on all of recorded history, will *not* provide inflation protection on cash over time.
I'm not dead opposed to changing where my EF is held i.e. cashing out I-bonds, but I'll only do so if I'm confident of a *better* long term alternative. I'm not convinced a year or two of temporary good rates in a MMF is the better option.