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So I started to ladder T-Bills for the reasons everyone is stating in this thread. The rate is so volatile (in a good way) that locking into anything even 12 months is too long for me and rates continue to climb. I use fidelity and my suggestion is this.
When they offer the new 4 week and 8 week and 13 week t-bill (they auction on diff days and diff weeks) go in and buy one of each of them with whatever money you can spare. Let's use 5k for each.
I would buy a 4 week t-bill with NO Rollover for 5k
I would buy an 8 week t-bill with NO Rollover for 5k
I would buy a 13 week t-bill WITH Rollover for 5k
Then after 4 weeks when that first on comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Then after 8 weeks when the second comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Now you will have 3 13 week t-bills rolling every 4 weeks or so and rolling into a new one with the proceeds. This way every 4 weeks you are capturing an increasing rate and not locked into anything longer than 13 weeks. You benefit from the rate hikes, can cash out at any time, and you have state tax shelter from the earned interest.
I can almost guarantee that the above will yield you more net income (taking in tax break) at the end of 11months then the 5% locked CD
just my 2cents
You can buy treasuries from just about any brokerage. I use Fidelity, as I like their platform and they don't charge fees/commissions for treasuries. Fidelity Fixed Income Page[fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond. Fidelity's Intro to Treasuries[fidelity.com]
This is true, but it doesn't make an 11-month CD at 5% a bad idea. Those HYS can change their rates at any time, but here you're guaranteed to get 5%.
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So the consequence of ending earlier is just you forfeit some of the interest you already "earned"? So for example, you put in $10,000, the penalties will never mean you lose any of the original $10,000, just the interest you earned? So basically no risk to your original investment?
You lose 3 months of interest, not principal. Correct.
Transfer it back to another bank
Or, open a CapitalOne 360 checking account, get checks and write yourself one.
Thanks for replying.So, I could just transfer the whole amount to another bank after 11 months ,and then the CD atomatically closes?Are there fees to transfer the money out?
Thanks for replying.So, I could just transfer the whole amount to another bank after 11 months ,and then the CD atomatically closes?Are there fees to transfer the money out?
My primary bank account has free wire transfers. I'm not sure how it will work when the CD matures but I'd imagine no more than $30.
darn, i opened up a capitol one savings account with the fall22 promo on 12/14, funded on 12/19. the promo for this cd ends 3/14. looks like i'm going to miss the 5% rate by a few days since i have to hold 90 days for the fall22 promo =\
hopefully there are even better rates in the next month or two, fed keeps raising rates...
I had never done this either so don't let the meanies get to you.
I just set up an account, wired the money and monitor online. Was quite easy.
To build (haha) on this, a great option over savings is to start a CD ladder.Budget out a years worth of investments, divide by 12, then purchase a new one every month., creating a new "rung" every time If after a year, things looking good for you, pull the interest and reinvest the principal, or keep throwing it all back in..Gives you decent liquidity after the first year. Just keep climbing that ladder. Not as risky as the "free market", might have to weigh out gov't bonds and T-Bills for your own situation, but it's a nice option to have that sweet spot of interest and cash availability. Ask your doctor if golfing is right for you. Then go hit the links with them and talk to people who can afford to dabble in all of those.
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When they offer the new 4 week and 8 week and 13 week t-bill (they auction on diff days and diff weeks) go in and buy one of each of them with whatever money you can spare. Let's use 5k for each.
I would buy a 4 week t-bill with NO Rollover for 5k
I would buy an 8 week t-bill with NO Rollover for 5k
I would buy a 13 week t-bill WITH Rollover for 5k
Then after 4 weeks when that first on comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Then after 8 weeks when the second comes up, buy another 13 week t-bill with the 5k WITH Rollover.
Now you will have 3 13 week t-bills rolling every 4 weeks or so and rolling into a new one with the proceeds. This way every 4 weeks you are capturing an increasing rate and not locked into anything longer than 13 weeks. You benefit from the rate hikes, can cash out at any time, and you have state tax shelter from the earned interest.
I can almost guarantee that the above will yield you more net income (taking in tax break) at the end of 11months then the 5% locked CD
just my 2cents
Fidelity Fixed Income Page [fidelity.com]
Follow the above link and scroll down to the row "U.S. Treasury." Choose the duration you want and click on it. You can then click "buy" to start a trade of a specific treasury bill/bond.
Fidelity's Intro to Treasuries [fidelity.com]
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Or, open a CapitalOne 360 checking account, get checks and write yourself one.
Correct me if I'm wrong but that primus account is not locked at 5%. It can down. The CD is locked.
Or, open a CapitalOne 360 checking account, get checks and write yourself one.
I just set up an account, wired the money and monitor online. Was quite easy.
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hopefully there are even better rates in the next month or two, fed keeps raising rates...
I just set up an account, wired the money and monitor online. Was quite easy.
To build (haha) on this, a great option over savings is to start a CD ladder.Budget out a years worth of investments, divide by 12, then purchase a new one every month., creating a new "rung" every time If after a year, things looking good for you, pull the interest and reinvest the principal, or keep throwing it all back in..Gives you decent liquidity after the first year. Just keep climbing that ladder. Not as risky as the "free market", might have to weigh out gov't bonds and T-Bills for your own situation, but it's a nice option to have that sweet spot of interest and cash availability. Ask your doctor if golfing is right for you. Then go hit the links with them and talk to people who can afford to dabble in all of those.
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