Buying T-Bills, Holding To Maturity

[Vincenzo Corleone]

I have a bunch of cash that I'm not willing to put into stocks, and don't want to leave in cash. I'd like to build a T-Bill ladder and was planning on doing that on TreasuryDirect (TD). Recently, however, I read that you can buy T-Bills at auction on Fidelity and Schwab, and was wondering if anyone can tell me if there are pros and/or cons buying them in either TD or a brokerage. Thanks.

 

[njhowie]

There's no drawback. The purchase/sale are commission free, at least at Fidelity.

There is also no requirement to buy at auction. You can easily buy in the secondary market where you will have access to most every outstanding issue, so you can pick and choose your maturity dates.

 

[jebmke]

There's no drawback. The purchase/sale are commission free, at least at Fidelity.

There is also no requirement to buy at auction. You can easily buy in the secondary market where you will have access to most every outstanding issue, so you can pick and choose your maturity dates.

Do the brokerages handle all the tax accounting for taxable accounts (amortization of premium/discount etc)? or is this something one has to do when preparing the return?

 

[njhowie]

Do the brokerages handle all the tax accounting for taxable accounts (amortization of premium/discount etc)? or is this something one has to do when preparing the return?

At least with Fidelity, if you use the download feature within Turbotax to import directly from Fidelity, it handles it. I can't speak for other tax software.

 

[OldShooter]

On the rare occasion that we buy T-bills, we just buy through Schwab. The only reason that I am aware of to screw around with Treasury Direct is if one wants to buy I bonds.

 

[nwsteve]

IMHO, buying thru your brokerage also makes it much easier to see and make any transactions in your positions. Plus, yearend record keeping is all in place

 

[jazz4cash]

If you are building a fixed income ladder right now brokered CDs beat treasuries from 2 yrs and beyond. It can change daily but using your broker gives you the ability to mix CDs and treasuries for various ladder rungs within a single account.

 

[Vincenzo Corleone]

Thank you all very much!

 

[foxfirev5]

If you are building a fixed income ladder right now brokered CDs beat treasuries from 2 yrs and beyond. It can change daily but using your broker gives you the ability to mix CDs and treasuries for various ladder rungs within a single account.

Likewise I'm beginning to see the CD rates catching up and passing Treasuries. For liquidity reasons my preference is to buy Treasuries unless the 5 year CD rate is at least .25% higher. For shorter terms of 1-2 years I'll go with whatever is higher.

Also, I only use a T-Bill ladder for the next years planned expenses. I would not not make this a significant portion of my fixed income. I don't want to reinvent the wheel every year while worrying about reinvestment risk. My LMP plan incudes two ladders of 5 years and one of 15 years. Split about 50/50 this gives me a current avg maturity of 5 years. This does not include my T-Bill ladder covering my 2022 annual IRA withdrawal and accumulating funds for 2023.

I only recently started this ladder since it currently makes no sense to park these funds in a money market for a year or so. If the MM rates get close to the T-Bills I'll let the T Bills mature and revert back to the MM. Pretty simple. Since all my other investments and bill pays are on auto pilot I need something harmless to manage and pick up some pocket change.