Why is this is better than an ETF treasury fund, CDs, and high-interest savings accounts?
Answer: Treasury Bills "interest" is state & local tax-free on the money earned. So if you're in a high-income tax state and city they're worth it.ETF fund aren't always 100% in treasuries and charge fees.
Question (asked a dozen or more times in the thread) : How does bill interest work?
Answer: Treasury Bills "interest" is the difference between face value and purchase price. You buy a $10k bill at less than $10k, upon maturity, it is worth $10k. The difference between purchase price and maturity value is your "interest."
Tax Equivalent Yield Calculator For Savings Bonds, Treasury Bills, and Tax-Exempt Money Market Funds
https://www.mymoneyblog
How Buy and Sell Treasury Bills
https://thefinancebuff.com/treasury-bills-cd-money-market.html
When are the auctions? When can I place an order?
4, 8, 13, 17, and 26 week bills are auctioned every week.
52 week bills are auctioned every four weeks.
You can see recent results and the planned schedule at: https://www.treasurydir
4 and 8 week bills are usually announced on Tuesday, auctioned on Thursday, and settle on Tuesday.
17 and week bills are usually announced on Tuesday, auctioned on Wednesday, and settle on Tuesday.
13 and 26 week bills are usually announced on Thursday, auctioned on Monday, and settle on Thursday.
52 week bills are usually announced every 4th Thursday, auctioned on Tuesday, and settle on Thursday.
At a brokerage, you can usually can place an order between the announcement and auction.
At TreasuryDirect, you can place an order up to about 8 weeks in advance.
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Treasury BILLS are currently paying over 5% for various maturity lengths under 1 year. These can be bought through most brokerages even without a TreasuryDirect account.
Treasury BONDS are paying 4% or less and have 20 or 30 year terms.
The 4 week bill ordering opens tomorrow 8/8, the deadline to buy it is sometime Thursday 8/10 morning depending on where you are buying it and it settles on 8/15.
On TD Ameritrade, they take your money on the 10th (take it out of the money you can trade with when you hit purchase which can be as early as the 8th) and buy the bill on the 15th during time which you earn no interest. Thus the reason that I stopped buying 4 and 8 week bills at auction. Secondary markets settle the next day so often a better deal. Treasury direct does not take the money from your bank account till the day it settles and Vanguard keeps it in the settlement fund earning interest till the day it settles as well. Not sure about the other brokerage houses. Also, not sure if you rollover the t-bills how the time between redemption and the next auction works as far as any interest you are losing as that is often a week of interest as well.
FYI, if you do the math, 4 weeks for $10,000 usually gets you about $40 in interest for letting them hold your money for 5 weeks.
The Monday auctions for 3 months and six months settle on Thursday so much less time to hold your money for nothing and less redemption downtime.
The money market funds often have repurchase agreements that are taxed at the state and local level but obviously more liquid. Am looking into the ETFs now.
Good luck to everyone!
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Do you think it is worth the hassle to remove it and buy T bills for 12 months?
How can I calculate how much I would save in taxes?
Now is it "fiscally optimal" to move it from the CD to the t-bill? Probably yes. A potential rate increase might come in the September FOMC meeting, which would increase your theoretical yield by another 0.25% (it's usually less, though). But since you'd only be gaining like $5/month you'd have to decide for yourself.. And if the rate decreases next year, you might as well have just stuck to the CD.
That being said, if you find yourself as proud new owner of $100, T-bill city, baby!
Talking about your taxes, I believe all interest is taxed as income. So how much tax savings? These numbers might be wrong, but the highest NY State Tax Rate looks like it's right under 6% and highest NYC tax rate is right under 4%. So at most, you'll be paying 10% as taxes (omg that's so high). For the year, if you make 5% on $10k, that's $500 total, so $50 goes to taxes with your CD, while it'd be $0 for your T-bill.
Treasury direct does not have a system in place to sell the bills on the secondary market. You would have to transfer them to a brokerage house first and then sell them through the brokerage house.
Only advantage to US T Direct is if you want to purchase small amounts like $100/$500. I think Fidelity etc have minimums.
Use this to get an idea of what your state tax responsibilities are: https://smartasset.com/taxes/cali...calculat
The point is that if you are in a regular income age group then you dont pay taxes on CDs vs TBills and some Bonds. States that dont have state taxes (or even local) wont matter or if you are in at retirement age then it also "Might" not matter.
Shahhere
These are purchased at "Face Value" so say for example and making up interest numbers you want to invest $1,000 you will pay $995 and at the end of 4 weeks will have a deposited amount of $1,000 back in your bank. With $5 in interest income.
Shahhere
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You'll have to do a lot of reading to understand Taxation and taxation limits on earned and unearned income. Essentially you can open a Custodial account (UTMA) and buy things like TBills and stocks and even Roth IRA if they have earned income reported etc.
For now, I am keeping things simple for my kids who do not work and am trying to keep them under the $1350 unearned income (Interest) for 2023 else you have report it on your taxes.
Shahhere
What do you intend to use it for? A 529 has the ability to invest as well as no taxes, and in some states the initial investments are not taxable (in CT there is a $10k yearly limit on it, I only know because I live there)., but the funds are to be used for college+ education or trades.
Shahhere
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I started buying T-Bills a month ago and created a "ladder" where you buy various maturities (I have a few 1 month, 8 week, and 13 week) so not all your money is tied up.
This also lets the interest compound as the short term rates compounded a few times are higher than simply doing a longer time period.
The high rates won't last forever (probably 12-18 months) but it's a safe way to make a little money if you don't have a need for it today and don't want to risk the principal.
If I understand your question correctly and what I read online it depends on your brokerage. I think this only works in Fidelity and TreasuryDirect where they are able to "Buy" the next TBill using the settled funds from the "Prior" ending TBill to autoroll your TBill over.
Shahhere
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For brokerages, it depends. Two of my brokerages, TD Ameritrade and ETrade, do not offer auto-rolling. That is why I use TreasuryDirect. I have been with them for 3 years and have not had any issues. I am able to link 3 different bank accounts with them at the same time. And I can change my bank account and auto-rolling settings at any time.
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