I’ve got a Schwab account and some cash I don’t plan on using for a while, so I bought $100k worth of T-Bills that mature in 3 months with a 4.6% rate.
Am I right in thinking I’ll earn $4600 after 3 months, or is it more like $1150 since 4.6% is the annual rate? Does the money just show up in my account when it matures? I feel like I’m messing up this math.
I’m ready for the roasting lol.
Interest rates like that are annualized so you can compare them easily.
Here’s how T-Bills actually work. You buy them at a discount and get the full face value when they mature. In your case, you’ll pay about $98,870 for $100k in T-Bills, and after 3 months you’ll get back $100k. So the interest is around $1130.
Longer-term Treasury bonds pay interest periodically, but T-Bills don’t.
@Brice
Exactly!
@Brice
Wow, thanks for clearing that up! The numbers finally make sense.
So I’m putting in $98,870, earning $1130, and getting $100k total back. Got it.
4.6% divided by 365 days, multiplied by 90 days (3 months), gives you about 1.13% for the quarter.
Is this $100k an emergency fund or for something else? If not, you might want to invest it. If it’s more of an emergency stash, you could consider something like SGOV, which is a Treasury ETF.
It’s not an emergency fund, just extra cash I’m parking short-term. Earning 1.13% is better than nothing, though not as high as stock market gains in 3 months—of course, that’s a risk. I’ve got separate funds for stocks and ETFs.
@Morgan
Yep, stocks can give you big returns sometimes, but they’re not guaranteed. With T-Bills, you’re getting a guaranteed return, even if it’s smaller. Earning 5% a year without risk is pretty solid.
@Morgan
If you’re ever unsure, you can visit your local Schwab office. They’ll help you for free.
Take a look at VUSXX—it’s got a 4.81% yield and you can buy or sell anytime. That’s what I’m using.
Just so you know, when buying on the secondary market (like through Schwab), it doesn’t matter what type of Treasury it is. If there’s 3 months left, it’ll trade and return the same whether it was originally a 20-year or a 3-month T-Bill.
Yep, I bought on the secondary market with Schwab. Thanks for the tip!
You can actually buy T-Bills for as short as a week with Schwab. You just need to adjust the search date settings to the current and next month. I’ve done it before when I needed to park money for a week.
Funny enough, the super-short ones often have higher yields but don’t lock you in for months or years.
I didn’t realize that—I should have adjusted the search date! I just went with 3 months, but I don’t see myself needing the cash soon. Maybe I’ll go for the 1-week or 4-week next time and roll it over.
Is the rate still good with 1-week T-Bills?
The 1-month T-Bill is yielding 4.88%, and the 3-month is 4.73%. The overnight RRP rate is around 4.8%, so a 1-week bill is likely close to that too.
Does anyone know if any Treasury ETFs are tax-free on federal taxes? It’s hard to find clear info on that. Seems kind of unfair if they’re not.
$BIL is a simple way to go. You get monthly payouts.
You’re a bit late to the party—should have jumped on these rates 2 years ago.
Winslow said:
You’re a bit late to the party—should have jumped on these rates 2 years ago.
Still a decent 4.7% for 4-week Treasuries right now.
Winslow said:
You’re a bit late to the party—should have jumped on these rates 2 years ago.
Still a decent 4.7% for 4-week Treasuries right now.
Yeah, the rate’s not bad at all.
My only regret is maybe going for the 4-week instead of the 3-month, but then I’d just have to roll it over anyway.