Joined Jan 2010
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Forum Thread
CD Vs T-Bills
February 27, 2024 at
10:14 AM
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Finance
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Last Edited by slicbrat February 27, 2024 at 10:17 AM
I know this question has been asked over & over again 
but I am in a bit of dilemma now. Just received a rate match approved from a local credit union on a 6 month CD at 5.5% and looking at a 26 week T-Bill looks like the rate is hovering at about 5.1% (high rate column, assuming that's what they will pay me at), which brings a difference of about 0.4%
https://www.treasurydir
I also live in a state that charges 4.05% on state income tax. Wondering if I should go with CD over T-Bills in this case?
I should also add that the local credit union actually deposits the interest earned every month into my checking account, which I guess I can reinvest.
but I am in a bit of dilemma now. Just received a rate match approved from a local credit union on a 6 month CD at 5.5% and looking at a 26 week T-Bill looks like the rate is hovering at about 5.1% (high rate column, assuming that's what they will pay me at), which brings a difference of about 0.4% https://www.treasurydir
I also live in a state that charges 4.05% on state income tax. Wondering if I should go with CD over T-Bills in this case?
I should also add that the local credit union actually deposits the interest earned every month into my checking account, which I guess I can reinvest.
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Some investors prefer them for their tax advantages and relatively low risk. Think local sewer districts, utilities, etc. Less likely to go belly up overnight. Boring but steady stuff. Kind of the opposite of bitcoin. Munis will not make you rich but they are can be attractive to many and for multiple reasons.
They enjoy federal tax exemption. If the issuer is in your state and your state has an income tax, these generally enjoy a tax exemption there too. May be meaningful depending on your tax brackets.
You can buy from tons of places. Fidelity, etc. Again, if you have a state with an income tax, you may wish to search for something local.
Some investors prefer them for their tax advantages and relatively low risk. Think local sewer districts, utilities, etc. Less likely to go belly up overnight. Boring but steady stuff. Kind of the opposite of bitcoin. Munis will not make you rich but they are can be attractive to many and for multiple reasons.
They enjoy federal tax exemption. If the issuer is in your state and your state has an income tax, these generally enjoy a tax exemption there too. May be meaningful depending on your tax brackets.
You can buy from tons of places. Fidelity, etc. Again, if you have a state with an income tax, you may wish to search for something local.
Thank you!
https://www.treasurydir
I also live in a state that charges 4.05% on state income tax. Wondering if I should go with CD over T-Bills in this case?
I should also add that the local credit union actually deposits the interest earned every month into my checking account, which I guess I can reinvest.
The last 6 month t-bill dropped to 4.881% (investment rate).
https://www.treasurydir
At this point, the longer terms seem to be dropping, likely in anticipation of a rate cut by the Fed. The best yields seem to be at 5.3% give or take on the 4 to 17 week t-bills. Whether that holds going forward or not is anyone's guess, but if you can lock in a longer term rate at 5.5% I would likely do that (esp if you are in a no income tax state). In a state where there is an income tax, it really depends on what rate and how much income you make. Just taking roughly 4% of 5% yields 0.2% cost at the state level and you are still no worse off, but that assumes you have a flat tax on all your income or your marginal income tax rate is fairly consistent year to year, which may not hold true.
My 2 cents.