I feel somewhat ridiculous asking this, as I generally am confident in my investing abilities and knowledge (or ability to research what I don't know), but I've never dealt with individual bonds and paying taxes on them - currently all other bond investments are in funds, not individual bonds, and these funds are in tax-exempt or tax-deferred accounts.
My husband has several Series EE bonds his mother bought for him when he was younger - all from 1991-1995, paying fixed 4%, and with maturities in 2021-2025 (30 years duration). The total value of these bonds is $3,206.88, and the total interest (so far) is $2,081.88.
I'm considering redeeming these bonds and buying more VTSAX (US stock market index - .05% ER) in our taxable investment account. From what I understand, we need to pay federal taxes on the interest earned when we redeem. (I believe that since these were bought for half of face value, we receive the full current value of the bonds when they are redeemed.) Other relevant info: Our income this year (married, filing jointly) is around 100K (hard to say exactly, had payout from my old employer's stock, not sure how that's taxed), less 18K for Trad 401k, so taxable income around 82K. Next year's income will be larger, probably 120-140K. But we'll hopefully both have 401ks, and will probably switch to Trad IRAs instead of Roths, so taxable income would be 73-93K. Basically, we may edge into the 25% marginal tax bracket, but be on the lower end.
I feel that a 4% risk-free return is pretty good, but I think it's a good time to invest more in stocks. We've pretty much hit our limit on what we can invest this year (50K), so redeeming would give us a couple thousand more to invest. The amount is probably small enough to not matter much, plus our taxable income next year isn't clear and may or may not be similar.
Any thoughts on this situation (that I'm probably overthinking)? Anything I should consider, resources I should read, anything I am misinformed on?