Super informative!! Ive been on the ibond train and im just now getting into t bills. I just made a small investment of $100 to get the feel of things and see how it all works. With IR's climbing on them its a no brainer. And i love how once it matures you can chose to rollover it to the next auction automatically!
Thank you for this great video. All the T-Bills I have bought through Fidelity are Zero, meaning you buy at a discount price. You should cover this at some point. Also, the difference between coupon, ask and bid prices. For me only the ask price applies (when buying through Fidelity).
Another great video, Erin. Your explanations are clear and concise, and the content is practical and useful. I will look into opening a Treasury Direct account.
Great video. A lot of people are just learning about t-bills, and they are a great way to invest short term cash. I have been buying both t-bills and cd's for the short term.
Thanks great video. Took me all me life to realize that T-Bills are a better investment than CDs which often carry early withdrawal penalty. I always wondered how banks etc. could offer guaranteed rates on CDs. Now I know! Take out at a CD at, say , 5% with a bank. Bank takes out a T-Bill at 5.5%. Bank pockets the .5% risk free. Plus I pay state and local taxes as well. Older and wiser now😀😀
A major disadvantage of buying on Treasury Direct (so I’ve heard) is that if you ever have any problem, forget your password, etc., it will take months to sort out. With a major brokerage, you can get someone on the phone pretty quickly and probably take care of it then and there. I’d avoid needing to work with government bureaucracy at all costs. Thanks for the video!
I totally understand how you feel. By them where you feel most comfortable- if your more comfortable with a brokerage, go for it!! I can say, on a personal level, I’ve never had any issues with treasury direct. I have been able to call customer service no problem and talk on the phone with a person.
@@truckingmoney485 you should be able to get them at any major brokerage. Some popular ones are Fidelity and Vanguard, but there are other options. I use Vanguard myself, but not for any particular reason. Like Erin said in the video, you’ll get the same rate regardless of where you buy it.
That is incorrect. I forgot my password and my account got locked. One phone call later and I was back in. My call was late on a Tuesday , perhaps I was lucky? No long hold time, no hassles. Maybe the Treasury Dept. got their act together? Edit- perhaps someone had long delays getting an account reopened but that was not my case.
Hi there Erin thank you for the great video, I live in South Africa I bought short term T-Bills in the USA, and with our weak Rand to your strong Dollar its a great Investment.
Great video Erin! I have a question and a comment. Question: can you clarify tax implications of rollover/ladder t-bills? Are you taxed in between transactions or when you "exit" the ladder at the end only? Comment: consider the use of IE instead of AKA when you want to rephrase something. AKA (also known as) precedes another name for something, not an actual explanation. Take it or leave it. Your video is great!
You are taxed in the year you receive the interest. If you by a 26 week t-bill now, that will reach maturity in this year, 2023 - so it will be part of your 2023 taxes. If you bought a 52 week t-bill now, that would mature in 2024, that’s when you would receive the interest and thus would be part of your 2024 taxes. (Regardless of ladder status - simply when that t-bill purchase matures).
Appreciate the great info. You mention the tax benefits of T Bills vs CDs. If I have a Roth IRA that was recently converted from Traditional IRA would it be any better to invest in one over the other. I won’t be touching the Roth for at least five years.
This is a very informative video on T-bills, Erin. Is there anyway we can continue to invest with the interest payments at the end of the maturity? I received the interest payments in my bank account, but I wanted to keep the money and continue to invest in T-Bills instead. Please help!
Sorry I was cut off. I just trying to say that Treasury Direct dont need a protection like FDIC or SIPC. As I understand no limits on the amount for individual or institutional account holdings. The $10 million is a limit for order to be placed on auction for institutional. Please correct me if I am wrong. Thank you again.
Folks quick question. What's the difference between putting 2k towards a 4wk TB vs a 13wk TB? is it just the small amount of % you might make more off doing a 13wk TB the only difference basically? I might be looking at this the wrong way but having 2k tied up for 4wks vs 13wk and making almost the same % but money held for less time seems better..?
Usually the rates for the various times aren’t so close together like they are right now. When they start heading down again is when you’ll see ppl trying to lock in a high rate for the longer period.
0:45 Federal Government has never defaulted, but they seem poised to do so.... "Social Security's trust funds may run out in 2034. These changes may help. Social Security's funds are projected to run out in the next decade, at which point 80% of benefits will be payable." Now as they have predicted this end, but are still willing to extract the full amount form their victims, it is starting to feel something akin to fraud.
Quick question, when the T-Bills mature and I don’t click reinvest does the entire amount get deposited by into my linked bank account? One RU-vid video made it sound as if it may be difficult & cumbersome to retrieve the invested money once mature. Thank you for everything you share and educate me about. I’ve shared you videos to my nieces who have financial questions.
Thanks! great video. And very clear. But regarding the ladder... my question is .. why not build a ladder using only 4-week T-bills? I understand that new T-bills are issues every week, right? So let's say I buy $ 1000 now of a 4-week T-bill, then next week I buy another $1000 in a new auction, then a 3rd week and then the 4th week. I select auto-re invest for all of them and forget. Wouldn't I have money available every week ? (cancelling the reinvestment option if I need the money). I would have Tbills coming to maturity and being reinvested every single week. Why is this not better than buying different term T-bills like you suggest?
Thanks for all your information on T-Bills. I'm still uncertain if once you lock in the interest rate at purchase, like for 17 months, does the interest rate stay the same for the entire 17 months?
Can you please explain to me how it can be that you would put down an order for a million-dollar t-bill not knowing what the rate will be for example if a bank is paying $5.25 yield what if the TV comes out much lower like 4.75 he would probably end up losing right? Or am I missing something thank you in advance for your response
You can do it with a checking or savings account. but you link that account to Treasury Direct. The money is returned to the link account once it matures or you could simply reinvest the money up to two years while earning interest.
Erin, I saw in the video that you can reinvest or rollover into the next T-Bill for a period of up to 2 years. Is there a simple way to keep that going beyond 2 years. I don't want to have to start a T-Bill Ladder all over again.. Thanks
Hi, I'm wondering at which point is the rate locked in for T bills. Is it locked in at the time of the purchase request or a few days later when the security is issued. Thanks
So if you're using this as a cash equivalent system, how do you get your money out when it matures? Does it just automatically get moved back to the account it came from or do you have to submit an order to get the money back? Also, what happens after it gets to maturity? Does it continue to increase in value, based on the original interest rate or does it stop appreciating and stay at the maturity level? These seem simple, but it isn't clear how they behave compared to CDs.
If you don’t select re-invest - with treasury direct, once it matures, it automatically goes to the account you choose. In my case it’s just a checking account. With the brokerage - it generally goes back to a sweep account or money market account at maturity. At maturity- full face Val - the money, interest and principal are given back to you. You are essentially cashed out. They don’t earn interest beyond that. Hope that helps! 😊
@@ErinTalksMoney Thanks Erin. It sort of felt like it was self regulating but I wasn't sure. That's an interesting way for an investment to manage itself.
Even if you set it up to not reinvest, there is a period (don’t wait to close to the maturity to do it) before it matures where you can go in and edit the holding and choose to reinvest onto the same time period you had before. It will roll right in the same day and there will be no loss of interest. Your purchase amt will be the same as before and the interest that was earned before will be deposited to your bank account you set up.
I missed something. When I make a purchase, how do I pay? Do I send a check, use a credit/debit card, give them access to a bank account (I would not like that), or do go to some building and hand over cash?
9:49 If you set it up to auto-reinvest you 4 week T-bills for the nest 18 months and then decide that you need the money after 3 months, then how do you go about stopping the cycle? And, if it is set to reinvest, how long do you actually have to pull that money before it does reinvest?
You can go in and edit it to not reinvest at the end of the current 4 week period. Conversely, you can set it from the beginning to no reinvest, but as maturity approaches (do at 7-10 days before the maturity), you can go in to manage direct section and make it roll over right into the next 4 week bill. Your original corpus will invest same as before and the interest will go into your bank account.
all these people worrying about holding t-bills that mature after the projected debt ceiling are uniformed. any t-bills that you purchase now are already included in the debt, so it isn't new debt. You would still get the face value of a t-bill even if the debt ceiling isn't raised, because the face value is already included in existing debt and isn't considered new debt.
automatic reinvestment doesn't cash out your t-bill, though. If you have t-bills with treasury direct, you cannot cash out a t-bill before maturity. if you purchased new auction t-bill through a brokerage, you could sell the t-bill on the secondary market if you needed the money; however, you will take a loss. treasury direct doesn't allow secondary market sales or purchases. to sell on the secondary market, you would have to request treasury direct to trasnfer the t-bill to a bank or brokerage that allows you to sell on the secondary market.
I’ve looked up numerous videos n I’m still confused. If I type in $100, the bill itself might be worth $98. So when it matures, I’m getting $100 back? So that means I’m getting $2 in interest even tho I paid $100 so I’d just be back at $100? I know I’m missing something but why would I buy something if I’m just getting my exact money back?
In your example you would only pay $98 for the t bill and get $2 in interest back. You would pay $98 and get $100 back. You don’t pay $100. Tbills are sold below face value
I’m assuming once you get back $100 you would then receive the interest rate. Example: T-bill worth $98 at 4.683% (annually). If you chose maturity for 4week (28days) period then it would actually be .35923% (4.683/365days= .01283% interest per day then 28days X 0.01283= 0.35923% interest)….. sooo $100 x0.35923%= ~36 cents. This means your total would be $100.36.
Hello I am new to Bills. I am wondering if I can purchase on TDirect the day before the auction or is it too late? And can I purchase Bills that have been auctioned a week earlier?
I'm looking to park some money in t-bills until I can move it into IRAs. My profile suggests that using the tax savings I get by placing money into my IRAs is better than just dumping it all at once. This year I will move approximately 52% of my Gross into a pre-tax 457b and another 13% of my gross into a ROTH. The pre-tax IRA in combination with the standard deduction for Married Filing Jointly and the amount we give to 501c3 entities will produce a negative AGI. For this reason, I am keeping the retirement savings rate down and will do likewise over several years. My questions mainly involve short-term vs long-term gains. Can I invest in T-bills that are LESS THAN 1 YEAR as long as they keep getting re-invested? I would like to have the lower gains rate, but keep the flexibility of pulling money out if it becomes absolutely necessary. Does Fidelity or another handle t-bills with automatically re-investing in a ladder structure? If I keep reinvesting in a 8 week t-bill, does the cumulative time count against the gains rate, or each one individually?
I'm slightly confused on the one Example of purchasing a $1,000 Face (Par) Value T-Bill. Do you Front (Pay in advance) the $1,000, I'm assuming in some sort of account, then the treasury sells you the T-Bill at a discounted price of $950, then the interest made on that $950 is $50?.......Do actually end up with an actual Final Net Total of $1,050, because you had $50 left over due to the Discount from the beginning?
In this example you would only pay $950 - when the t-bill matures, you would get $1,000 back. You pay a discounted face value up front and get back the full face value
I just signed up for TreasuryDirect and there are some caveats people should be aware of. Creating an account isn't as simple as one might expect. They required that I sign an Account Authorization form. This cannot be done online. You must print out the form, sign it and mail it in. They require this form to be notarized. After you they receive your letter in the mail, they sent me an email saying that it can take up to 13 weeks for review and processing.
@@ErinTalksMoney Maybe there's something different with me. Looking back at the email they sent, it says they are having trouble verifying my information. I'm not sure how many people go through this extra step.
I had no problems creating my account. Do you have your own checking or savings account you can link to Treasury Direct? Maybe the reason they required you to sign an Acct. Authorization Form.
Did everybody just see what happened today (March 10th, 2023)? The market thinks that the collapse of Silicon Valley Bank is going to force the Fed to only increase interest rates by 25 basis points. From what I could tell, the T-Bill interest rate dropped a little and the TLT jumped big. I think the zero coupon T-Bills might have a difficult time getting above 5% until the May meeting. I'm thinking of buying a coupon T-Bill (meaning, non-zero coupon), just to see what the difference is other than an interest payout.
99-44/100% of my IRA is in T Bills purchased at a brokerage. To keep my asset allocation in line, I'm forced t o have some cash or fixed income in my taxable account. I use TBs as well as ETFs with Treasuries, such as SCHO. I have a tiny bit of long Treasury ETFs (VGLT and EDV) too. I will add more when I expect the Fed to lower rates again. For now it is a placeholder.
add more of what? Why would you buy more treasuries or treasury based ETFs if the Fed lowers rates? Also, treasury ETFs are not the same as treasuries and have no protection or tax treatment as treasuries.
@@hanwagu9967 If I buy LONG Treasuries ETF just before the Fed lowers rates, the NAV of those ETFs will go up. I can then sell and receive a capital gain. The same would happen if I bought a long term Treasury now, and sell after the rates go down, on the secondary market. The holdings of Treasury ETFs are safe, therefore the ETF assets are safe. The NAV will move up and down. Whether I own the actual Treasury or Treasury ETF, they are free of State income tax. I hope that explanation helps, Han. I will be happy to answer further questions.
Very good overview. As far as laddering, I don't think it's available at Vanguard - do you know if it is ? I have heard it's available at Fidelity and know about TD. As far as selling T-Bills early, any gain or loss is a capital gain or loss as opposed to interest. One can make money buying and selling T-Bills in a rising interest rate environment during periods of market volatility.
I am very confused when it comes to the auction part. You really didn’t explain anything about that. If I’m going through treasury direct, do I need to worry about that and what does it even mean? Yes I find that part very confusing. I mean, of course I know what an auction is, but I just don’t know how that relates to me buying T bills.
The auction is between banks and institutional investors. Personal investors - you and me - do not participate. We simply accept the rate that is the outcome from the auction.
Just for background... So, one of my Aunts asked through my Mother about slightly less than $10K. That was in the 1970s. In 1998, she had over $400K. She did EXACTLY WHAT I SAID! NEVER faulted one IOTA. YES...T.BILLS. The mix was for short and long. I went on to doing billion dollar deals in public service and tech. Once my feet were through the doorway, I rocketed to the top! With current events? And EE better than bank passbooks, Govn'ts Surplus will bring Premiums down... Things are going to be great! China/others blew it BIG TIME! BILLS now; BINDS later. Watch premiums, then buy with both fists! (Have back-ups on thumb drives and multiple storage. Multiple locations. Keep records of EVERYTHING. Do record keeping in a off-line box.*) * at Oracle we called a computer a "box". Treasuries are 50% of my strategy now. Soon to go 80%. Platinum: 10%; Options: 10%. 🎉
The Treasury Direct web site does NOT work! After you enter all your information a dozen times, all correctly, it still claims you did not enter an email address or you haven't answered six security questions or a valid phone number etc. Charles Schwab here we come!
The rate of return sounds excellent until you realize that, due to inflation, you're still losing value. EDIT: I'm not saying T-Bills are bad. I'm saying inflation is bad. Some people are happy with the T-Bill rate, but they ignore the impact of inflation. I agree that it's better to lose less money.
That "should" effectively always be the case. If it were the other way around, the US government would be subsidizing the economy and that's a recipe for implosion.
Exactly. It's like saying insurance is losing value. In aggregate, yes. But that's not the point of insurance. Same with cash. Cash is a (usually)slow losing value proposition, but having none leaves you vulnerable to disaster. You wouldn't want a portfolio full of T-bills, but for the short-term amounts, it's perfectly defensible.
You are right. The majority of investors are looking at short term returns. I think T-bills are going to be very popular and not a good long term investment.
Videos like this are just one of the reasons I believe the government will default on it's debt in June. Everybody is suddenly getting into treasuries. Could there be a better time to pull the rug?
Just letting you know that I actually did open a Treasury Direct account and started with a $1k 2 month T-bill just to learn the process. It hasn't matured yet, so I haven't gone through the cycle yet, but thought you might like to know that your subscribers actually follow your advice!
United States Allies ' Partners' have STOPPED subscribing to US govt T Bills since January'2022. On Top of it Debt Ceiling has been suspended till Next US Presidential election. ' GOD SAVE THE T-Bills'
I purchased t-bills for the first time. It was so easy (treasury direct) -- 26-weeks, $2000 was $1949. Will be doing more. Good short term place to keep money.
I am selling my bond funds and buying CD's and treasuries yielding over 5% for 18-24 months. This is better than bond funds are doing. Doing this within my IRAs on Fidelity to postpone Fed taxes. I may get back into bonds when the market settles out on Fed rate hikes and inflation (probably at least another year).
I invested $1000.00 in T-Bills with fidelity on December 25,2023, and a few days ago Jan.25 was the maturity date(one month).....They gave me back my $1000.00 with $6.40 cents as gains...I called in and talk to a Fidelity investor, and he told me the 5.34% was not a monthly gain, it was a yearly gain.....can someone tell me if I got scam or not? I think I was supposed to get around $54.00 gain😡😡😡
78 times we raised the debt ceiling 😮 SVP owned T Bills, guess they had too many long term ones. Thanks Erin a lot of great stuff. Hey maybe a video on FDIC insurance, along with is my brokerage money safe
Opened a Schwab account in Dec '22. Went through a learning curve and finally have it figured as it pertains to T Bills and Money Market Funds. I'm conservatively opting for 4 week bills in deference to the shaky grounds re: "debt ceiling" and low possibility of s default. 4 weeks are paying around 4.6 and the Schwab Money Market is around 4.40. I would go for the 6 month at 5.6 or so, but leary of a "default". Anyway, it's been a good experience. The no state tax with T Bills is a plus. I started buying I Bonds in April of 2022. My wife and I learned and took advantage of purchasing 10K for our own bonds and 10K gifts for each other. When the interest rates get lower, we'll cash them out and lose 3 months interest. Of course we'll have to transfer the gifts to each other. I have a feeling that we'll continue buying TBills instead of more IBonds. Good luck everyone!!
Hello, great video. Question...as of today, the 3-month is at 5.38 and goes lower as the time gets longer. Why would someone choose to invest in a longer time period when the return % goes down? While it's more work, isn't it best to keep reinvesting in the short term higher yield t-bills?
Full faith and credit means its ability to tax the citizens of the united states. Our labor backs and pays those bills. Our labor backs every dollar in our economy...and all I got was a T-shirt that says "Moo"
Concerning automatic reinvestments, the only time i have been able to schedule an automatic reinvestment is when I am making my non-competitive bid. Any time i have gone back some time later and attempted to schedule a reinvestment, it simply did not happen. At first I thought maybe that was because it was too near the maturation date so I tried doing it earlier and it still did not work. What am I doing wrong?
Just a fun fact ufb direct is offering a savings account with a 5.2% interest rate. It's actually the highest rate I have been able to find anywhere. However like you say taxes maybe an issue for some for me it's irrelevant as I don't have enough income to pay taxes. Also the bank is known for Not raising your rate when new rates come out. However if you just shoot them a message and they will give you the new rate if one is available. I know this because I did it I was being paid 4.80% I believe it was then I saw them advertising the new 5.02% rate. I went into the account and sent them an email saying I wanted the new rate and they just did it.
Great info Erin ! Wondering if you can shed more light on the banking industry ? Janet Yellen said there are more that are in trouble that she's keeping an eye on .
Thanks Erin. A question... If you automatically reinvest and the maturity date is the same day as an auction date, does it go into that auction or the next one?
Very informative! Q: If T-bills are purchased in a Treasury Direct account and subsequently mature, are the mature funds automatically re-deposited in the Purchaser's source account or do they remain in the Treasury Direct account? If that is the case, is this account (at Treasury Direct) Interest bearing at all and accessible 'on Demand' and how SECURE are moneys left in a Treasury Direct account BUT NOT reinvested?
When the treasury bill matures, if you have not selected the reinvest option - your funds will automatically be transferred into the account of your choosing - generally your checking or savings. It does not stay with treasury direct 😊
@@ErinTalksMoney Have heard rumors of people being unable to get immediate (post maturity) access to (large) funds. Is this possible and does the Debt ceiling shambles have anything to do with it?
