When you sell your EE bonds you will have to pay taxes on any gain. You can invest the proceeds into an IRA with earned income. There are income limitations on traditional IRAs if you are eligible for a company retirement plan and there are income limitiation on contributions into a Roth IRA. The 2009 contribution limit for an IRA is $5000 in you are under 50 and $6000 if you are over 50.

I don't think so, but I am not an expert. Here is what I do know:

You are required to declare the sale of investments as income. However, it is not earned income and only earned income is eligible for investment in an IRA.

Earned income is by definition: compensation from participation in a business, including wages, salary, tips, commissions and bonuses.