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DQOTD: T-Bills vs Cash Savings?
10-29-2022, 10:59 AM
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#1
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Location: NC
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DQOTD: T-Bills vs Cash Savings?
With interest on cash accounts around 2% and interest on T-Bills around 4%, I can't think of any good reason to hold much cash at the moment. - T-Bills are almost as risk free as cash savings. So almost a wash in terms of safety.
- T-Bills sacrifice a little liquidity - if you want to realize the face value interest.
- T-Bills aren't subject to state or local income taxes, cash savings interest is. Both are subject to Fed taxes, might as well earn more interest with T-Bills.
- T-Bills can be bought with no transactions costs many places.
What am I missing (am I the last to catch on)?
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No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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10-29-2022, 11:26 AM
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#2
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Sep 2012
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You are missing nothing. You are not last to catch on. Most of the population still has their cash languishing in accounts under 1%. We haven't seen conditions like this in over a generation, so it is out of mind. Welcome to the party. It still isn't too late.
It won't last forever either.
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Retired Class of 2018
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10-29-2022, 11:26 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Aug 2012
Posts: 1,829
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 Quote:
Originally Posted by Midpack
With interest on cash accounts around 2% and interest on T-Bills around 4%, I can't think of any good reason to hold much cash at the moment. - T-Bills are almost as risk free as cash savings. So almost a wash in terms of safety.
- T-Bills sacrifice a little liquidity - if you want to realize the face value interest.
- T-Bills aren't subject to state or local income taxes, cash savings interest is. Both are subject to Fed taxes, might as well earn more interest with T-Bills.
- T-Bills can be bought with no transactions costs many places.
What am I missing (am I the last to catch on)? |
Sounds good to me and you can always stick with the very short term ones if you need cash soon.
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10-29-2022, 12:43 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Jan 2006
Location: Rio Grande Valley
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We went through some of this in 2016-2018 when Fed was raising rates albeit at a much slower pace than now. CDs eventually caught up and surpassed treasuries, including no-penalty CDs.
FWIW I consider very short-term treasuries same as cash - safe and highly liquid. Short CDs too.
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Retired since summer 1999.
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10-29-2022, 12:49 PM
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#5
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Moderator
Join Date: Jul 2017
Posts: 5,775
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Although I wanted to keep a large cash cushion, I went into a frenzy of buying short term T bills for those reasons. (I am in NY and state tax is a factor for me.)
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10-29-2022, 12:53 PM
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#6
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Full time employment: Posting here.
Join Date: May 2013
Posts: 727
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You are far from the last to catch on. I’ve been doing the same with 6-months of cash set up in a ladder with 1-month intervals. It’s a little more work when funds are left over, but it is worth it.
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“If you don't do it this year, you will be one year older when you do.” - Warren Miller
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10-29-2022, 01:44 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Posts: 2,351
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Quote:
Originally Posted by Willers
You are far from the last to catch on. I’ve been doing the same with 6-months of cash set up in a ladder with 1-month intervals. It’s a little more work when funds are left over, but it is worth it.
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I also have a T-bill or CD maturing monthly for the next 12 months. As one matures, I roll it into a new one, taking advantage of the rising rates along the way and boosting the return for our cash reserve.
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10-29-2022, 02:06 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Red Rock Country
Posts: 1,929
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Marcus savings account rate was just raised to 2.5% but I certainly wouldn't denigrate buying T-bills.
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10-29-2022, 02:08 PM
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#9
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Jan 2008
Location: NC
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Quote:
Originally Posted by Ian S
Marcus savings account rate was just raised to 2.5% but I certainly wouldn't denigrate buying T-bills.
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Ally seems to trail some, but they're up to 2.35% at present. But I'm moving a large chunk of cash into T-Bills at over 4%.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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10-29-2022, 02:14 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Posts: 3,083
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They are very liquid too. I sold $50K for the Ally bonus deal, it cleared the next day.
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10-29-2022, 02:26 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Posts: 2,351
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Quote:
Originally Posted by Midpack
Ally seems to trail some, but they're up to 2.35% at present. But I'm moving a large chunk of cash into T-Bills at over 4%.
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It's really a no-brainer right now when you can get 3.7% on 1-month bills and over 4% for 3 months or longer. Leave an emergency fund in cash and put the rest in short term T bills or brokered CDs. Enjoy it while it lasts.
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10-29-2022, 02:37 PM
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#12
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Recycles dryer sheets
Join Date: Dec 2021
Posts: 131
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T-bills are actually safer than cash in the bank. If the Federal Government ever defaults on t-bills, paper money will have no value.
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Some say nothing is impossible, I do nothing every day.
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10-29-2022, 05:48 PM
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#13
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Recycles dryer sheets
Join Date: Jan 2015
Location: Boerne
Posts: 421
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Quote:
Originally Posted by JoeWras
You are missing nothing. You are not last to catch on. Most of the population still has their cash languishing in accounts under 1%. We haven't seen conditions like this in over a generation, so it is out of mind. Welcome to the party. It still isn't too late.
It won't last forever either.
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Dito!
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10-30-2022, 04:09 AM
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#14
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,303
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Quote:
Originally Posted by disneysteve
It's really a no-brainer right now when you can get 3.7% on 1-month bills and over 4% for 3 months or longer. Leave an emergency fund in cash and put the rest in short term T bills or brokered CDs. Enjoy it while it lasts.
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What a difference a year makes. While it won’t last forever, I don’t see us going back to Oct 2021 and the years before anytime soon. I dumped all our bond funds in July and now I’m converting a lot of cash too.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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10-30-2022, 05:02 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,884
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The only disadvantage of treasuries I can think of is that if you unexpectedly need the funds before maturity, you may need to sell at a loss.
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