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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The other brokerages are not insured, either. They do, however, have SIPC coverage. And cash sweeps will also have FDIC protection.
https://www.nerdwallet.
Buying T-bills directly allows for better returns (for your time) because you are saving some on the expense ratio of many of the ETF/mutual funds. Some charge anywhere from 0.09-0.40 percent depending on the fund and class of investment you purchase.
And you can pick longer maturities that may yield higher returns (6 month T-bills are trading at 5.5x% currently).
Also if you purchase T-bills directly you could be exempt from state taxes for the profits. That can't be said for many/most mutual funds that trade govt debt (there are some that are exempt year to year because they only hold T-bills, not repurchase agreements)
If you have a marginal 37% Federal tax rate plus 3.8% NIIT, plus a 10.3% state tax rate (and your state taxes aren't deductible on your Federal return), then a Treasury Bill earning 5.20% would have a taxable equivalent yield of: 6.30%
Formula: 5.20%*(1-0.37-0.038)/(1-0.37-0.038-0.103)
You can plug in your own rates. You can find out more by searching for "taxable equivalent yield" on the Bogleheads wiki. You could also compare after tax yields.
There is a 1 week gap at Schwab for the weekly auctions.
Potentially higher return, and exempt from state taxation if held to maturity.
May be safer since FZDXX invests in commercial paper.
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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
Maybe someone has a more detailed answer (and correct me if I am wrong).
As noted it all depends on what you are planning; 529 for example are limited to education expenses only with a few exceptions. Doing a Roth IRA is very beneficial but you are essentially putting in money that wont be able to be withdrawn without penalty for decades etc.
I have to do more reading but a child can have earned income upto $13xx and unearned passive income of $1250 before they have to pay taxes. I could pay my kid for babysitting and in turn use those wages to fund his Roth IRA.
Shahhere
No one needs to as this Lady has dont most of this work for us/you:
https://www.youtube.com/watch?v=rFuiC-UNeMc
https://www.youtube.com/watch?v=k...7bg
Shahhere
https://webapp.ftb.ca.g
SPAXX
VMFXX
VUSXX
Also, BILS/SGOV ETF with ~5.3% current yield and monthly dividends. These also have state tax benefits.
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"CIT Bank 11 Month No-Penalty CD: Earn 4.90% APY*"
https://slickdeals.net/f/16639061-cit-bank-11-month-no-penalty-cd-earn-4-90-apy
edit: answered
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