With my cash, Y not 6mo T-bills?

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rosalee
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With my cash, Y not 6mo T-bills?

Post by rosalee »

I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
student
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Re: With my cash, Y not 6mo T-bills?

Post by student »

Sounds fine. I do want to mention that 0.05% at Capital One Savings? At least switch to its HYSA at 0.6%. https://www.capitalone.com/bank/savings ... s-account/
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Mr. Potter
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Re: With my cash, Y not 6mo T-bills?

Post by Mr. Potter »

Sounds like a good plan, also, Live Oak Bank is paying .8% on their HYSA, always at or near the best rates.
smectym
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Re: With my cash, Y not 6mo T-bills?

Post by smectym »

rosalee wrote: Thu May 19, 2022 6:55 am I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
Quite reasonable. Perhaps consider also adding the 3 month bill. Since the Fed apparently intends to raise rates by half-point increments like a metronome for the next foreseeable period, the rates on both the three month and six month will continue to rise: three month bills might capture some of those gains more quickly.
smectym
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Re: With my cash, Y not 6mo T-bills?

Post by smectym »

smectym wrote: Thu May 19, 2022 8:17 am
rosalee wrote: Thu May 19, 2022 6:55 am I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
Quite reasonable. Perhaps consider also adding the 3 month bill. Since the Fed apparently intends to raise rates by half-point increments like a metronome for the next foreseeable period, the rates on both the three month and six month will continue to rise: three month bills might capture some of those gains more quickly.
PS If you like, you can select for any bill the option to have treasury automatically roll over the bill for a specified number of periods. And if you change your mind you can always cancel that option at any time.
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HMSVictory
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Re: With my cash, Y not 6mo T-bills?

Post by HMSVictory »

Sure go for it. I keep my emergency fund at Capital One earning 0.60%.

It represents less than 2% of my overall portfolio and I want immediate access to it so I just keep it simple.

If the 20k is a small part of your portfolio I don't think this is worth it but if its a big part then sure go for it.
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dred pirate
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Re: With my cash, Y not 6mo T-bills?

Post by dred pirate »

smectym wrote: Thu May 19, 2022 8:17 am
rosalee wrote: Thu May 19, 2022 6:55 am I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
Quite reasonable. Perhaps consider also adding the 3 month bill. Since the Fed apparently intends to raise rates by half-point increments like a metronome for the next foreseeable period, the rates on both the three month and six month will continue to rise: three month bills might capture some of those gains more quickly.
this will also make the money more quickly accessible if this is your e-fund. Basically you need to have enough liquid cash on hand to get you to the time when bills start to mature.
mary1492
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Re: With my cash, Y not 6mo T-bills?

Post by mary1492 »

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ekid
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Re: With my cash, Y not 6mo T-bills?

Post by ekid »

rosalee wrote: Thu May 19, 2022 6:55 am I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
Hundreds of $millions are moving in this direction. Maybe billions.
If it's wrong a LOT of people are making the same mistake. Moving the money is what forces banks to raise their rates. Mostly they haven't done it yet.
Trezcan
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Re: With my cash, Y not 6mo T-bills?

Post by Trezcan »

It's called a treasury ladder. They are very common, and your effective APY goes up each time one of the rungs renews (if yields are climbing).

Even if you need the money out of the blue, they are highly-liquid and can be sold anytime the markets are open. If yields have been climbing, you might sell at a very slight loss. If you let them mature, you're guaranteed to get the par value with no risk of capital loss (unless the US Govt defaults).
MnD
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Re: With my cash, Y not 6mo T-bills?

Post by MnD »

That's what I set up for our house/new car fund over the past few months.

I hold 6 T-bills maturing mid-month each month the next 6 months.
I have auto-renew set up so each bill maturing is used to purchase another 6-month bill.

I choose 6 months because we do run the house/car fund down to nearly zero from time to time and we usually know about major hits like that about 6 months out.

If it was a fully funded emergency fund I would be comfortable funding a 12-month or 24 month bond ladder.
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gabourel
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Re: With my cash, Y not 6mo T-bills?

Post by gabourel »

My wife a retired RN has about $250k in her retirement plan all in cash as she cannot tolerate any loss. She has that for at least 5 years. I have more than twice that. She is 73. I am a 72 year old sort of semi-retired solo lawyer. Business has been hit very hard with Covid producing no profit in about 18 mos, despite PEP loans which have allowed me to maintain my 3 fabulous staff. Between pensions and social security my wife and I have had no need to withdraw anything other than the RMD required to maintain a steady balance of about $100k in our ordinary bank account. Fortunately paid off house, put son debt free through law school, helped him with a down payment for his house, paid off cars and no debt and a fairly modest lifestyle except for quite of bit of Rick Steve style world travelling.

I am about to get back in to the market and have been waiting. I intend to just do the BND VTI. VXUS Larrymore thing after being a life time moron in investing. I also intend to not be influenced by my wife's panicking when the market goes down.


All we have ever done is Fidelity stocks, mutual funds and cash. Can I buy these 6 mo t-bills through Fidelity? for my wife's account. Can I just call Fidelity to buy them or do I have to do it online somehow?
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Kevin M
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Re: With my cash, Y not 6mo T-bills?

Post by Kevin M »

gabourel wrote: Thu May 19, 2022 8:53 pm All we have ever done is Fidelity stocks, mutual funds and cash. Can I buy these 6 mo t-bills through Fidelity? for my wife's account. Can I just call Fidelity to buy them or do I have to do it online somehow?
Yes. You can call them, but according to there rate sheet, they will charge you $19.95 flat fee for a trade. Buying online is free, and it's very easy. There are lots of threads on this.
If I make a calculation error, #Cruncher probably will let me know.
secondopinion
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Re: With my cash, Y not 6mo T-bills?

Post by secondopinion »

MnD wrote: Thu May 19, 2022 7:28 pm That's what I set up for our house/new car fund over the past few months.

I hold 6 T-bills maturing mid-month each month the next 6 months.
I have auto-renew set up so each bill maturing is used to purchase another 6-month bill.

I choose 6 months because we do run the house/car fund down to nearly zero from time to time and we usually know about major hits like that about 6 months out.

If it was a fully funded emergency fund I would be comfortable funding a 12-month or 24 month bond ladder.
Agreed. I do go a step further and aim for a 2 year duration or so as the average (maximum maturity date being five years). Of course, my emergency fund is really solid and I have generous short-term fixed-income in my portfolio as well in my taxable (since I am not going to waste my valuable space of my Roth IRA on such investments).
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Re: With my cash, Y not 6mo T-bills?

Post by Katietsu »

rosalee wrote: Thu May 19, 2022 6:55 am And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.
If your bills are at treasury direct, you can only request your funds at maturity. If you need access before maturity, you can move them to your brokerage account to sell early. Alternatively, you can just buy them in a brokerage account. Some brokerages will set up an automatic/rolling reinvestment at maturity but others will not.
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Jerry55
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Re: With my cash, Y not 6mo T-bills?

Post by Jerry55 »

Sounds like you're copying my style... :sharebeer

I was laddering 6 month T-Bills for a few years until a few years ago...waaaay back then, 6 month bills were paying about 5.25%, and I'd invest / reinvest every time it came up for renewal (I had 6 of them running monthly) and eventually they went down to 1.3% then on one renewal, it was about 0.15% and I ran away a few years back.

Each investment was 25K (x 6 months per) and I remember getting my $$$ back but instead of $100 +, it was around $17...LOL !

I'm back, and I won't check the box "Reinvest" (maximum of 4 times per) but I'll watch. I just began again about 2 weeks ago, around 1.35%, but it was better than Capitol One 360 paying about 0.6% AND there's no Illinois state tax.
I believe it's a good choice til you find something better... Good Luck !
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mary1492
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Re: With my cash, Y not 6mo T-bills?

Post by mary1492 »

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mapleosb
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Re: With my cash, Y not 6mo T-bills?

Post by mapleosb »

mary1492 wrote: Thu May 19, 2022 8:49 am So, then why not do it at 12 months for 2.15%?
If that fits into your time frame, why not indeed.

I think another good thing about using treasuries for emergency funds is that the are highly flexible. You can buy, let's say, a $20,000 treasury note, and, if an emergency comes up, you can sell any part of that, i.e, $5000 and still keep the rest in the original note. Very much unlike a bank CD where it is all or nothing with a penalty usually as well. Granted, you may have a market price loss if rates were climbing, but no penalty otherwise.

I only buy our treasuries with the intention of holding to maturity, BUT, the option is there.

Good luck with your plans. :sharebeer
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Re: With my cash, Y not 6mo T-bills?

Post by MikeG62 »

rosalee wrote: Thu May 19, 2022 6:55 am I look at 6 month T-bills paying 1.49%. If i buy some of those, starting on different dates, then as each matures and is re-invested at the new (maybe increased) rate, then such a plan seems more productive than anything else i can think of. But i'm kinda new to all this so i might be missing some important feature.

I have an account with TD and already own one I-bond at 7+%. Just leaving my cash in CapOne savings at 0.05% will not offer much benefit. With this money i do not need any risk. I could scrape up $20K for this plan over the next 8 months. And since one of these bonds is always approaching maturity, if i needed some spending cash, just sell one bond.

A reasonable plan, IYO? (in your opinion)
Yes very reasonable. I would purchase online through my broker - just prefer their website to Treasury Direct (where I also own I Bonds).
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longview
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Re: With my cash, Y not 6mo T-bills?

Post by longview »

MnD wrote: Thu May 19, 2022 7:28 pm I hold 6 T-bills maturing mid-month each month the next 6 months.
I have auto-renew set up so each bill maturing is used to purchase another 6-month bill.
This thread is the first place I've seen mention of the "autorenew" vs paying some broker to manage a ladder. This seems great for my retired parents -- where do you all set this up?


Thanks.
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
ModifiedDuration
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Re: With my cash, Y not 6mo T-bills?

Post by ModifiedDuration »

If you need to sell a Treasury bill, is there a fee for a bill held at Vanguard, Fidelity, or Schwab?
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Re: With my cash, Y not 6mo T-bills?

Post by KyleAAA »

Sounds reasonable. I keep half of my emergency fund (6 months worth) in a HYSA paying 0.6% and typically put the other half in a 5 year CD ladder to get a bit of extra yield on money I don’t expect to ever need. The penalty is only 2 months interest so I’m not worried about having to cash in early. But since CD rates haven’t been materially higher than HYSA rates the last few years I’ve been letting them go to the HYSA at maturity rather than rolling them over into a new 5 year CD. I’ve been thinking of a treasury ladder instead of a CD ladder due to the higher rates available, myself.
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Re: With my cash, Y not 6mo T-bills?

Post by secondopinion »

ModifiedDuration wrote: Fri May 20, 2022 9:27 am If you need to sell a Treasury bill, is there a fee for a bill held at Vanguard, Fidelity, or Schwab?
No. Selling treasuries is free (including TIPS) at these places. They are pretty much the only bonds that brokerages give the special treatment for buys and sells on the secondary market. That is, as long as you are doing the transaction online, which is reasonable enough.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
MnD
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Re: With my cash, Y not 6mo T-bills?

Post by MnD »

longview wrote: Fri May 20, 2022 9:17 am
MnD wrote: Thu May 19, 2022 7:28 pm I hold 6 T-bills maturing mid-month each month the next 6 months.
I have auto-renew set up so each bill maturing is used to purchase another 6-month bill.
This thread is the first place I've seen mention of the "autorenew" vs paying some broker to manage a ladder. This seems great for my retired parents -- where do you all set this up?


Thanks.
At my broker (Schwab). There are no fees to purchase at auction or to enable autorenew (it's just a check box when you place a t-bill order.)
There are also no fees at Schwab to buy and sell Treasuries on the secondary market, although there will be a tiny bid/ask spread.

There's also an automated tool at Schwab to set up a complete Treasury bond ladder purchase with a few clicks with various rungs and durations.
But it does not support a 6-bill, 6-month ladder so I set it up myself.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
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Kevin M
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Re: With my cash, Y not 6mo T-bills?

Post by Kevin M »

longview wrote: Fri May 20, 2022 9:17 am This thread is the first place I've seen mention of the "autorenew" vs paying some broker to manage a ladder. This seems great for my retired parents -- where do you all set this up?

Thanks.
Fidelity also offers this option for Treasuries bought at auction.
If I make a calculation error, #Cruncher probably will let me know.
drzzzzz
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Re: With my cash, Y not 6mo T-bills?

Post by drzzzzz »

Kevin M wrote: Fri May 20, 2022 12:41 pm
longview wrote: Fri May 20, 2022 9:17 am This thread is the first place I've seen mention of the "autorenew" vs paying some broker to manage a ladder. This seems great for my retired parents -- where do you all set this up?

Thanks.
Fidelity also offers this option for Treasuries bought at auction.
Very easy at Fidelity and simple to do online with no costs and not having to talk with anyone at the firm. When you purchase at auction through their site, you are asked whether you want to enroll in autorenew and then the week that the t bill comes due you are automatically enrolled into the issue being auctioned that week. You can also stop your autorenew any time that you want.
gabourel
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Re: With my cash, Y not 6mo T-bills?

Post by gabourel »

mary1492 wrote: Fri May 20, 2022 5:24 am
gabourel wrote: Thu May 19, 2022 8:53 pm My wife a retired RN has about $250k in her retirement plan all in cash as she cannot tolerate any loss. She has that for at least 5 years. I have more than twice that. She is 73. I am a 72 year old sort of semi-retired solo lawyer. Business has been hit very hard with Covid producing no profit in about 18 mos, despite PEP loans which have allowed me to maintain my 3 fabulous staff. Between pensions and social security my wife and I have had no need to withdraw anything other than the RMD required to maintain a steady balance of about $100k in our ordinary bank account. Fortunately paid off house, put son debt free through law school, helped him with a down payment for his house, paid off cars and no debt and a fairly modest lifestyle except for quite of bit of Rick Steve style world travelling.

I am about to get back in to the market and have been waiting. I intend to just do the BND VTI. VXUS Larrymore thing after being a life time moron in investing. I also intend to not be influenced by my wife's panicking when the market goes down.


All we have ever done is Fidelity stocks, mutual funds and cash. Can I buy these 6 mo t-bills through Fidelity? for my wife's account. Can I just call Fidelity to buy them or do I have to do it online somehow?
Is your wife's retirement plan with prior employer at Fidelity, or has it been rolled over to an IRA at Fidelity which you manage?

If the plan is still with prior employer, if wife cannot tolerate any loss, look for a stable value fund within her plan. They are guaranteed not to lose money and will pay more than cash or other cash equivalent alternatives (i.e. money market). Within an employer's plan, you may be limited to only funds which they stipulate as opposed to everything Fidelity offers. So, buying treasuries may not be an option.

If you have rolled over to an IRA at Fidelity, it is easy to buy any maturity treasury through Fidelity. Do it yourself online through the website, because if you phone it in there is a $19.95 commission for each order, vs. free doing it yourself. Go to the following link - you'll figure it out:

https://tinyurl.com/527w67bx
Thank you so much. I had to retrieve an old boglehead account I think I never posted on just to ask this one question.

It was rolled over. OK I can buy it online. So since they are 6 mo t-bills every 6 mos I have to rebuy? -- or it just go into cash? Can I also assume that for instance I could buy $250 k at once?
atlguy
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Re: With my cash, Y not 6mo T-bills?

Post by atlguy »

Yes 6 month T-bills. In this steep inflation environment you want something that resets fast. Even a year is too long.
mary1492
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Re: With my cash, Y not 6mo T-bills?

Post by mary1492 »

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