Should I put cash holding in T-bills?
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Should I put cash holding in T-bills?
Hi all -
Sweet and simple I hope. Maxing all the typical accounts (401k, IRA, & HSA), but now i'm starting to accrue a bit of cash that I want to use for a house downpayment (timeline isn't determined). What is the best way to put this money to combat the high inflation we are currently facing? I've been told T-Bills, CDs, etc. are the best. FYI I've already put 10k into Ibonds for 2022.
As always thanks for the help BHs!
AceJ
Sweet and simple I hope. Maxing all the typical accounts (401k, IRA, & HSA), but now i'm starting to accrue a bit of cash that I want to use for a house downpayment (timeline isn't determined). What is the best way to put this money to combat the high inflation we are currently facing? I've been told T-Bills, CDs, etc. are the best. FYI I've already put 10k into Ibonds for 2022.
As always thanks for the help BHs!
AceJ
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Re: Should I put cash holding in T-bills?
That's what I did.
I also am maxing retirement accounts, and had a small windfall, so bought t-bills comparable to my mortgage rate. Maybe interest rates will be way up when I reinvest.
I considered I bonds but it didn't seem worth the hassle, and I already have too many moving pieces.
I also am maxing retirement accounts, and had a small windfall, so bought t-bills comparable to my mortgage rate. Maybe interest rates will be way up when I reinvest.
I considered I bonds but it didn't seem worth the hassle, and I already have too many moving pieces.
Re: Should I put cash holding in T-bills?
Nothing wrong with this.
Short term Treasuries and short term CDs are attractive cash positions in my view.
Short term Treasuries and short term CDs are attractive cash positions in my view.
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Re: Should I put cash holding in T-bills?
It's a viable option.
You might also consider TIPS. That is where I am putting cash these days.
First max out on your annual allowance of I-bonds.
This thread may be helpful to you: viewtopic.php?t=378350
You might also consider TIPS. That is where I am putting cash these days.
First max out on your annual allowance of I-bonds.
This thread may be helpful to you: viewtopic.php?t=378350
Re: Should I put cash holding in T-bills?
From what I see for cash it is a race between HYS and MM accounts. MM accounts seem to be pulling ahead after offering 0.01% for so long. For a bit longer term I'm looking at treasury auctions for 6 mo. T-Bills.
Re: Should I put cash holding in T-bills?
Are T bills in IRAs tax free?
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Re: Should I put cash holding in T-bills?
I don't know if T-bills can be in an IRA (someone correct me if I'm mistaken).
Thanks everyone for the feedback. I think I'm going to do a "ladder" approach with T-Bills starting next week as interest rates just seem to continue to increase.
Re: Should I put cash holding in T-bills?
You should be able to buy T-bills/notes/bonds in an IRA. Fidelity allows that and Google search confirms that these can be held in an IRA. A one year T-note is offering 2.92%. So its not exactly an inflation buster, although its way better than the 0.x% being offered by savings/hysa.acejacksingh wrote: ↑Sat Jun 25, 2022 4:21 amI don't know if T-bills can be in an IRA (someone correct me if I'm mistaken).
Thanks everyone for the feedback. I think I'm going to do a "ladder" approach with T-Bills starting next week as interest rates just seem to continue to increase.
Re: Should I put cash holding in T-bills?
Tax deferred, not tax free unless you means Roth IRA.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Re: Should I put cash holding in T-bills?
HSA and MM have inferior rates vs 3- and 6- month CDs and T-bills.
I am looking at putting some cash into CDs and T-Bills.
I am looking at putting some cash into CDs and T-Bills.
Re: Should I put cash holding in T-bills?
Sounds like unnecessary work to me. I would just go with the cheapest short term index fund you can find.acejacksingh wrote: ↑Sat Jun 25, 2022 4:21 amI don't know if T-bills can be in an IRA (someone correct me if I'm mistaken).
Thanks everyone for the feedback. I think I'm going to do a "ladder" approach with T-Bills starting next week as interest rates just seem to continue to increase.
Re: Should I put cash holding in T-bills?
They absolutely can be purchased in an IRA (I've done it).acejacksingh wrote: ↑Sat Jun 25, 2022 4:21 amI don't know if T-bills can be in an IRA (someone correct me if I'm mistaken).
Thanks everyone for the feedback. I think I'm going to do a "ladder" approach with T-Bills starting next week as interest rates just seem to continue to increase.
I think your approach makes a lot of sense. I've been a buyer of Treasuries over the last 45 days myself.
Real Knowledge Comes Only From Experience
Re: Should I put cash holding in T-bills?
Your broker would send the 1099 not treasury (e.g. schwab, fidelity, etc) so they will know the account type the t-bills are held in.
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Re: Should I put cash holding in T-bills?
Make sure you understsnd what you are getting yourself into when "people say", everyone's situation is different.
T-Bill are risk-free if held to maturity. If you sell them early you could lose money.
Of course, if interest rates continue to rise, if you lock your money in T-Bills today, you will not be able to buy them with a higher rate next month either so you may also consider this losing money (lost opportunity)
CDs are similar with regard to what the penalty is for not holding them for the duration.
Hight Yield saving accounts and money markets are much more flexible about both adding and retrieving cash, at hte expense of possibly lower returns.
Since you don't know when you will need the money, be wary of locking the money past the date you might need it (you are aware you can't sell those Ibonds for a year right?)
T-Bill are risk-free if held to maturity. If you sell them early you could lose money.
Of course, if interest rates continue to rise, if you lock your money in T-Bills today, you will not be able to buy them with a higher rate next month either so you may also consider this losing money (lost opportunity)
CDs are similar with regard to what the penalty is for not holding them for the duration.
Hight Yield saving accounts and money markets are much more flexible about both adding and retrieving cash, at hte expense of possibly lower returns.
Since you don't know when you will need the money, be wary of locking the money past the date you might need it (you are aware you can't sell those Ibonds for a year right?)
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Re: Should I put cash holding in T-bills?
Thanks for the input and providing a different view. I know Ibonds can't be sold for a year and there is a penalty if sold before 5 years. I honestly don't expect to buy real estate anytime soon anymore (3+ years) so I'm just looking for ways to optimize my cash holdings which are currently in a 0.90% savings account.Raspberry-503 wrote: ↑Sat Jun 25, 2022 6:08 pm Make sure you understsnd what you are getting yourself into when "people say", everyone's situation is different.
T-Bill are risk-free if held to maturity. If you sell them early you could lose money.
Of course, if interest rates continue to rise, if you lock your money in T-Bills today, you will not be able to buy them with a higher rate next month either so you may also consider this losing money (lost opportunity)
CDs are similar with regard to what the penalty is for not holding them for the duration.
Hight Yield saving accounts and money markets are much more flexible about both adding and retrieving cash, at hte expense of possibly lower returns.
Since you don't know when you will need the money, be wary of locking the money past the date you might need it (you are aware you can't sell those Ibonds for a year right?)
I still believe (for my situation) it would be a good idea to buy T-bills in a "ladder" format over the next few months as interest rates continue to increase. FYI I also plan to hold these bills until maturity so don't expect to sell at a loss. I have about $40k and plan to do it in biweekly increments at $5000. Just did the first one for this coming Monday's auction
Thanks again everyone for the advice!
AceJ
Re: Should I put cash holding in T-bills?
In a similar situation here, am seriously considering doing a short term treasury ladder. Jim Sloan recently posted an article on this very topic. He's suggesting a 6-month interval out to 2 years:
https://seekingalpha.com/article/452024 ... in-reserve
https://seekingalpha.com/article/452024 ... in-reserve
Re: Should I put cash holding in T-bills?
Fixed income would be my choice if I was in your shoes.acejacksingh wrote: ↑Fri Jun 24, 2022 8:16 pm Hi all -
Sweet and simple I hope. Maxing all the typical accounts (401k, IRA, & HSA), but now i'm starting to accrue a bit of cash that I want to use for a house downpayment (timeline isn't determined). What is the best way to put this money to combat the high inflation we are currently facing? I've been told T-Bills, CDs, etc. are the best. FYI I've already put 10k into Ibonds for 2022.
As always thanks for the help BHs!
AceJ
Yes to treasuries, CDs, or equivalent funds/ETFs. I'd find the best deal...no state taxes on treasuries.
I would determine a timeline and match that duration.
I might go half TIPS and half nominal...but it depends. Schwab's 7.5-year-effective-duration TIPS-ETF SCHP paid out nicely on June 7th.
Scroll down to distributions and study the distribution table: https://www.schwabassetmanagement.com/products/schp
Many would say to stay short if you don't know your duration. I might go longer if I could lock in 3.5% or higher.
There's more to consider, but this is a start.
Yes this is a wishy-washy answer, because the correct answer will only be available in the future.
Re: Should I put cash holding in T-bills?
Although I'm retired for 10 years, I keep spare cash in online accounts and roll them thru 26 week T-Bills. I do 1 per month (30k increments) for 6 months and watch for any changes...that way I can move them if they drop rates to ~ 0.20% again. Right now, they're around 2% or a bit more.
Retired CSRS on 12/19/2012 @ age 57 w/39 years |
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Re: Should I put cash holding in T-bills?
I like that idea for retirement, but for now still need to build wealth and battle this high inflation environment. I'm only 33 and have ways to go...Jerry55 wrote: ↑Sun Jun 26, 2022 11:39 am Although I'm retired for 10 years, I keep spare cash in online accounts and roll them thru 26 week T-Bills. I do 1 per month (30k increments) for 6 months and watch for any changes...that way I can move them if they drop rates to ~ 0.20% again. Right now, they're around 2% or a bit more.