Should I put cash holding in T-bills?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
acejacksingh
Posts: 379
Joined: Thu Dec 04, 2014 10:15 am

Should I put cash holding in T-bills?

Post by acejacksingh »

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
NerdicSkier
Posts: 81
Joined: Mon Dec 17, 2018 4:08 pm
Location: Michigan

Re: Should I put cash holding in T-bills?

Post by NerdicSkier »

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.
chassis
Posts: 2183
Joined: Tue Mar 24, 2020 4:28 pm

Re: Should I put cash holding in T-bills?

Post by chassis »

Nothing wrong with this.

Short term Treasuries and short term CDs are attractive cash positions in my view.
protagonist
Posts: 9277
Joined: Sun Dec 26, 2010 11:47 am

Re: Should I put cash holding in T-bills?

Post by protagonist »

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
User avatar
Leif
Posts: 3705
Joined: Wed Sep 19, 2007 4:15 pm

Re: Should I put cash holding in T-bills?

Post by Leif »

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.
dan916
Posts: 64
Joined: Tue Mar 31, 2020 12:39 pm

Re: Should I put cash holding in T-bills?

Post by dan916 »

Are T bills in IRAs tax free?
Topic Author
acejacksingh
Posts: 379
Joined: Thu Dec 04, 2014 10:15 am

Re: Should I put cash holding in T-bills?

Post by acejacksingh »

dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
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.
kvdecide
Posts: 41
Joined: Tue Apr 19, 2022 4:15 am

Re: Should I put cash holding in T-bills?

Post by kvdecide »

acejacksingh wrote: Sat Jun 25, 2022 4:21 am
dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
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.
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.
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Should I put cash holding in T-bills?

Post by jebmke »

dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
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
chassis
Posts: 2183
Joined: Tue Mar 24, 2020 4:28 pm

Re: Should I put cash holding in T-bills?

Post by chassis »

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.
cjcerny
Posts: 605
Joined: Sat Sep 15, 2007 12:47 pm

Re: Should I put cash holding in T-bills?

Post by cjcerny »

acejacksingh wrote: Sat Jun 25, 2022 4:21 am
dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
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.
Sounds like unnecessary work to me. I would just go with the cheapest short term index fund you can find.
MikeG62
Posts: 5065
Joined: Tue Nov 15, 2016 2:20 pm
Location: New Jersey

Re: Should I put cash holding in T-bills?

Post by MikeG62 »

acejacksingh wrote: Sat Jun 25, 2022 4:21 am
dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
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.
They absolutely can be purchased in an IRA (I've done it).

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
dan916
Posts: 64
Joined: Tue Mar 31, 2020 12:39 pm

Re: Should I put cash holding in T-bills?

Post by dan916 »

jebmke wrote: Sat Jun 25, 2022 6:56 am
dan916 wrote: Fri Jun 24, 2022 11:08 pm Are T bills in IRAs tax free?
Tax deferred, not tax free unless you means Roth IRA.
Right, tax differed. How does the treasury know what account its in (IRA or not) when it comes to them sending or not sending 1099?
gionnovi
Posts: 45
Joined: Wed Dec 01, 2021 8:24 pm

Re: Should I put cash holding in T-bills?

Post by gionnovi »

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.
User avatar
Raspberry-503
Posts: 954
Joined: Sat Oct 03, 2020 6:42 am

Re: Should I put cash holding in T-bills?

Post by Raspberry-503 »

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?)
Topic Author
acejacksingh
Posts: 379
Joined: Thu Dec 04, 2014 10:15 am

Re: Should I put cash holding in T-bills?

Post by acejacksingh »

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?)
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.

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
Count If
Posts: 56
Joined: Mon Nov 29, 2021 10:24 pm

Re: Should I put cash holding in T-bills?

Post by Count If »

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
hudson
Posts: 7119
Joined: Fri Apr 06, 2007 9:15 am

Re: Should I put cash holding in T-bills?

Post by hudson »

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
Fixed income would be my choice if I was in your shoes.
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.
User avatar
Jerry55
Posts: 864
Joined: Tue Jan 27, 2015 12:56 am
Location: That Toddlin' Town

Re: Should I put cash holding in T-bills?

Post by Jerry55 »

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 | Good Bye Tension, Hello Pension !!!
Topic Author
acejacksingh
Posts: 379
Joined: Thu Dec 04, 2014 10:15 am

Re: Should I put cash holding in T-bills?

Post by acejacksingh »

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.
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...
Post Reply