Earn 5% APY On Emergency Savings With A T-Bill Ladder | Fidelity, TreasuryDirect & Schwab Auto-Roll
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- เผยแพร่เมื่อ 12 มิ.ย. 2024
- I taped most of this pre-Silicon-Valley-Bank collapse, but it's turning out to be more relevant than ever with the current flight to safety into Treasury bills, notes & bonds. In this video, I'll talk about:
✅ How I turned our Fidelity brokerage account into a “high-yield savings-account” (HYSA) for some of our emergency savings that’s now approaching an APY-equivalent of 5%.
✅ Which T-Bills I currently hold in this quasi-“high-yield savings account” & why
✅ How does auto-roll work
✅ And why Fidelity auto-roll & TreasuryDirect auto-rolll are better than Schwab auto-roll
👉 Subscribe for all things inflation, Treasury bills, I-Bonds, investing & retirement!
#jenniferlammer #bonds #fixedincome
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5.964 4wk T-Bills?
Why would they jump 2%?
Hello Jennifer,
I'm very new in the US market and I watched your videos related to TBills and IBonds. I bought via TD some back in late December and now it happens that some 26-week T-Bills have a maturity date of 06/15/2023, I did not select the auto roll as I wanted to see how the process flows. Now not sure what to do if the default happens or how to avoid the risks?... desperate to find the information that will address my exact situation...
Loving this! It's basically exactly what I've done: 3 months' expenses in a high-yield savings account, and the rest split across five 17-week T-Bills at TreasuryDirect maturing every 3 to 4 weeks.
I’m doing the same with 17 week T bills. I keep my emergency money in my brokerage account that’s giving more than HYS
I have around 6 months of expense in cash and about another 1.5 years of Essential Expenses (Mortgage/Utilities etc...) in a T-bill ladder with 3 13 week T-Bills as the base, but with a single 8 week T-Bill so that I have 30% in each of my 13 weeks and 10% in my 8 week. That way 30% matures every month and then between the month maturities I have funds available.
In short I keep about 2 years worth of expected expenses out of the market so swings like we are seeing recently are less stressful. I'm a couple months away from retirement, I have been working on my investment strategy for a couple of years to make sure when the day comes that everything is in place.
Love that Fidelity auto-roll, and thanks for pointing out how to turn off Fidelity Auto-roll in the Top 4 Brokers video. I totally did not catch that when looking at my email notices.
Good of you to call out Schwab for the absurd week lag in auto roll.
I love your personality and teaching style. Very methodical, thorough, and informative. I am praying for an increase in video releases and frequency.
I know! She’s someone I’d go for coffee with.
Agreed she's super straight forward and clear and also friendly!
Excellent video! Always enjoy your content, Jennifer.
I admire your pragmatism and realism. I'm a 71 year old man who is that rare American saver. I had no need for an overpriced home, an upscale car, lavish Parisian vacations, and the like. T-Bills are the best financial vehicle right now because little else is remotely worth the risk. I highly recommend that young professionals buy I Bonds in every year they can. It's about the only financial asset that has a prayer of keeping up with inflation.
I am keeping all my T-Bill HYS in Treasury Direct for now, even though I have accounts with Schwab. And I have moved up the ladder buying 17 and 26 week T-Bills on a weekly basis. Most of Emergency Funds are still in actual HYS accounts. Thanks for the great info.
I have three 13 week t-bills in vanguard. No auto-roll but personal finance is kind of my hobby so I don't have issues being on top of it. They are laddered a month out so each month I roll into a new one.
Hi Jennifer, Thanks so much for all the help I got from you concerning I bonds. Valuable information in an easy to understand and patient format.
Great videos as always. Could you also make some videos about Municipal and corporate bonds?
Thanks. Waiting for you to talk about turning off auto-roll!!!!
Insta-subscribed. Great channel.
This content is sooo excellent. Starting some months ago I replicated your laddering strategy with both Fidelity and Schwab. My conclusion was that Fidelity did a slightly better job for the reasons you mentioned. Schwab was no slouch, though, and I'm comfortable using either firm....Fidelity just fit my goals slightly better. Fidelity also had those funky two-week T-bills while I never saw those available on Schwab's site. I will need to watch your "how to turn-off auto-roll with Fidelity" content. I have managed to do this by cancelling the auto-generated buy order but this is kinda klutzy with Fidelity, IMO, so I'll look for other ways to do this.
My understanding is you have to call fidelity to cancel an auto roll. I did this one and it was a fairly quick and simple call
I have a ladder set up with TDA. I called in and asked about setting up auto-roll after the initial purchase and was told they don't support it. And, since the funds aren't available from a maturing TBill to immediately purchase the next in the sequence, you have to call them the day before auction and ask them to do the roll for you.
Thanks for the information you present here.
Thank you I just heard of T Bill laddering and been wanting more knowledge.
This video on how to build a T-Bill ladder may help: th-cam.com/video/__oqvdtLoiE/w-d-xo.html
Unrelated question. Which camera do you use for filming your videos? I love the video quality and field of view it captures. Thanks.
First, I'm glad I watched this video. I just purchased my second rung on my t-bill ladder at Schwab and wondered what would happen during auto-roll. A WEEK?! Since I'm investing in 13 week t-bills, that'll mean A MONTH of idle time on EACH rung of my ladder each year. No thank you! I just opened an account at fidelity and am following your lead on this one
Thank you for this helpful information!
Thank you for your videos. Your explanations are really helpful and direct.
Love the channel. I have a feeling you're going to get very popular with the current economic climate.
Thank you been thinking about this
Instant Like. Thanks a ton for addressing the time gap issue! I haven't been using the auto-roll feature on TD as I'm still in the ladder building phase. I have a "spare" separate Bill for some extra cash that isn't part of this ladder and I had some issue figuring out how to roll into the next 4-Week Bill without having to experience delay. I went ahead and put that into a 13-Week BIll that auctions tomorrow and issues on the 16th rather than waiting for next 4-Week Bill that doesn't issue until the 21st. My 4-Week Bill should mature before the issue date for the 13-Week one.
Thanks for this info... Im curious to know, in what scenario would you want to turn off Auto Roll? Also how long do people typically leave Auto Roll on for?
I like how Treasury Direct automatically assigns my standard beneficiaries at purchase, as opposed to any extra steps after purchase.
@@gg80108 Per transaction, yes, so multiple transactions are needed for multiple beneficiaries.
Thanks to you, I ladder 17 week T-Bills every month @ $50,000 each time. You opened my eyes on that! All through my IRA.
It's through E-Trade which is pretty straightforward but there's no auto-roll. I have to stay on top of the auctions using the Treasury Direct calendar.
I also have about 6-8 month's worth of monthly expenses handy. I look forward to your upcoming videos!
Good stuff, thank you for the info. Personally, I keep around 2 months in checkings, 6 months expenses in a HYSA, and all the rest in treasury direct on auto-roll 13 week t-bills.
I no longer keep an emergency fund. I have credit cards for that need and would transfer from investments to pay them off if I ever needed to do that, which I likely won't very often. That allows me to hold more money in longer term higher yielding investments.
I can look at a T. Bill ladder as an investment, though. 5% risk-free is very good!
I look for some info and ievitable you seem to have the right video
we're doing autonrolled 4 and 8 wk t bills in treasury direct, and 13, 17 and 26 in 401ks with Fidelity. If rates reach 5.5% then 2, 3 or 5 year notes in 401k will be tempting.
Thanks for explaining the advantages of buying T-bills through a broker (as opposed to Treasury Direct). You make some good points. I’m off to watch your video on the top for brokers for T-bills to learn more!
Signed my daughter up on treasury direct. Her first post-college investment.
I’m wondering if auto roll will be available when Schwab takes over all the TD Ameritrade accounts.
I really enjoy the depths you go into making these topics as frictionless as possible for your viewers. Love the analytical approach. I'm curious on your take on the TBill rate decline? I think I was making an assumption that as the bank rate went up, the TBill rate would too but over the last few auctions things are going back down. Seems like an opportunity to explain how to buy longer bills/bonds and also remind all of us why the rate fluctuates ;)
How do I find out t bills’s interest for 1 month, 3 months, 6 months and 12 months? Thanks Jennifer!
I started doing this recently too. Only been playing around with a little bit of money. 1000 in a 4 week and 500 for an 8 week and 13 week. I’ll start doing even more soon.
Great Video, thank you. I see that currently I can get 5.25% on a 18 month CD, and only 4.21% on a 18 month treasury bill. Any comment on why / how a bank can pay a full percentage point above treasuries? Thanks in advance
Great content! Which website is the table at 1:33 from?
Would u now be putting money back in the market w maturing short term T bills with likely pausing of rate hikes?
7 months of emergency fund is a must (for mortgage)
4,8,13 week. Fully laddered. 100k.
Is it possible that the auto-roll time lag at Schwab versus Fidelity had anything to do w/ a difference in Pre-approved option levels? Maybe at Fidelity prior permission is given to auto-roll unsettled cash? Or even simpler, was there an existing settled cash balance at Fidelity that allowed the immediate auto-roll?
Thanks for helping us out on laddering T-Bills. I bought two 26-week T-Bills with the same PAR amounts ($40K) on issue dates of 02/09/23 and 03/16/23. Both T-Bills has the same investment rate of 4.895. However Treasury Direct withdrew differing amounts from my bank account. A difference of $11.13. Can you explain this? TIA.
Should we wait until March 22nd to purchase more?
Thanks for the great video! I use T-bills to save towards I bond purchases for 2024 (since I maxed out in 2023). I happen to like the 26 week T-bill (5.183%). It gets me to September, then I can get a 13 week T-bill to get to Jan 2024. With the fed hiking rates, is it possible for the 26 week T-bill to hit 5.5% this year? Let's hope so!
Thanks for your assistance. I like you am buying T-Bills on Treasury Direct thanks to your videos. No need to worry about bank failures here. I am also looking forward to your video on I bonds in April 2023 to see what your thoughts are on buy or no buy on them.
Banks and t-bills all rely on the same backing against failure: the US government
My TBill ladder is simple. Single "breadwinner". I have 3x13 weeks on autoroll. Each bill contains 2 months worth of expenses. I maintain at least 2 months worth of expenses in my checking and pay for everything on credit and pay everything off at the end of the month. From "Event-Zero", I'm able to decide each month if I want another 2 months worth of cash by choosing not to roll a bill. This gives me extra time for missing dates and screwing up my own calendar ;)
Awesome video, just subscribed. Would you mind doing a video on the interest earned on a 4week t bill on AutoRoll? I have 8 months saved for an emergency fund to cover my monthly debt.
What is the target yield that we would start thinking about longer term treasuries? I seen the last 2 year note was around 4.6% which got me thinking about it. Thanks! Great contet. 👍
Hi, I’m looking at buying Munis in the secondary market on the Schwab platform, including some that expire in 6-9 months. Is there any different tax treatment since these are “short term”, or does it make no difference if I buy a 6 month vs 5 year muni?
Hi Jen, Great info on building bond ladders. Is building a TIPS ladder exactly the same process, or are there nuances to TIPS vs T-bills vs CDs? thanks for all you do!
The laddering concept is the similar, but TIPS work differently from I-Bonds & CDs. This TIPS video & some of the other TIPS videos on this channel may be helpful: th-cam.com/video/JKbvtdcsPSM/w-d-xo.html
Can you do a video about deminimis rule for secondary market t-bills?
So you mentioned the benefits to buying bonds through Fidelity as opposed to Treasury Direct. What are the disadvantages to using Fidelity as compared to Treasury Direct?
So I just maybe have heard the disadvantage with Fidelity...Fidelity deducts from your account at time of order and not time of bond purchase.
Is it logical to take move money from the regular saving aconet to the T ?
Can additional funds be added to a Tbill at maturity that is on autoroll at Fidelity?
Just a quick question how long does it take to get your money out and transferred to your bank once an ibond is over a year old?
With the massive drop in yields the last couple of days, will we see 5% on t bills again?
I chose not use auto roll on my purchase of a 13 week tbill. Can I now go into my account and turn it on after the purchase?
My Rollover IRA is at Fidelity. I wanted to follow you in establishing a T-Bill Ladder. I was told by two different "Specialists" in the Fixed Income Dept. that I could not do automatic rollover within a retirement account????? Also, I have looked at the offerings on Tuesday and Thursday for the last several weeks, and can't figure out how you get a full ladder when Fidelity doesn't offer many different maturities.
Do you have a video on how to transfer treasury direct securities to a broker?
Thanks, I buy 8 week TBills and SWVXX money market fund. I feel safer in TBills.
How is retiree setup different specifically?
When I get a roll over tbill, the extra is placed in an s&p 500 mutual fund
I went to fidelity and currently they don't have any T-Bills available. So how long does it take for fidelity to have more T-Bills available?
I actually decided what you did as well. I was going to get into the 17 week when they first came out, but decided on staying with the 13 week. I'm glad I did because of the rapidly changing rates, and I wanted my money back faster when my ladder stopped. I stopped it two weeks ago, and have been getting my money back every week since then. By the end of May, I will have it all back. Glad I did that too because as of this writing, it looks like the 2-year is showing 4.3% from being 5.1% just last week. Either a lot of people are getting out as well, or something weird is going on.
FYI if your cash settlement account at Fidelity is the Treasury Money Market it’s yielding a little over 4% right now. So if there’s overlap in buying tbills your money is actually getting a decent interest rate. I moved some emergency money that I wasn’t planning on using for tbills from Capital One to Fidelity because it was higher. If your settlement account isn’t the Treasury or Government Money Market it’s easy to switch.
I did same thing. Not trusting banks right now
Capital one savings have a 3.4% rate. Not as good as 5 but…
I'm new to Fidelity - are you saying the default brokerage account can be changed to this fund with symbol FZFXX? Not seeing where that option is to change on my account.
I did same! Fidelity default is SPAXX
@@DaniElle-di4ho Do you mean change it to SPAXX or do you mean change from SPAXX to something else?
Jennifer, Can I sell T-Bills on Vanguard and get liquidity same day or next day? How do I do that?
At TreasuryDirect using auto roll, how many days are
you out of the market during each auto roll.?
How do I open a Fidelity Brokerage account? Are there any fees? I have been purchasing I-bonds and T-bills through Treasury Direct.
Do you think the recent events with SVB and other potential bank disasters will affect T-bill rates?
How can I buy A T-Bill Ladder at Fidelity?
We have an emergency business fund of about 100G into our BOFA account. Not earning any interest. Where is the best way to keep our business emergency funds with interest? Please advise. Thanks
How do you feel about a tbill etf like $BIL ?
Please add chapters to your videos, it is really hard to parse through them without chapters.
@DiamondNestEgg I'm getting ready to build my first T-Bill ladder thanks to your great videos. However, I wonder if you can address any potential risk with T-Bills related to the upcoming debt ceiling fight in Congress. I realize it's a long shot and I know there would be massive global problems if the US defaults on any of its debt, but is there any chance that the Treasury would NOT pay out a matured T-Bill on time? Would it be safe to just sit in a high-yield account around 3.6% for now, then start a T-Bill ladder in the fall after the debt ceiling issue is (hopefully) resolved? Thanks!
I'd like an update on the debt ceiling situation, too. I feel like it is still something to be slightly concerned about.
it looks like there is a $1 fee per transaction for redemption of a T-Bill in Fidelity? How do I see what I really earned/fee pay after the redemption/transaction?
I assume Vanguard does not have auto roll (?)
I understand that if you buy the bills in your 401k and so you will be paying taxes on withdrawal when retired, you lose the advantage of not paying local and state taxes on your tbills. Thus you might go with CDs if they pay better APY. Going to pay taxes the same, on tbills or cds income.
If you live in a state that does not tax withdrawals from retirement accounts that is not a concern - right?
In these uncertain times when the equity markets are so over-valued and there are so many indicators of an upcoming potentially large recession that would reset equity markets to more reasonable valuations, and when interest rates on short term treasuries are in the 4-5% range, does it make sense, at least in one's retirement accounts, to preserve portfolio value by temporarily getting out of equities and into treasuries, and then going back to one's asset allocation sometime during the recession once equity markets are not so over-valued? And, with this reset as a goal, does it make more sense to do this in treasury ladders, or to do it in ladders using short term treasury ETFs?
I have some 3 months, 13, 17 weeks and 6 months Tbills. I also have the Schwab Money Market at 4.5% and some 6 months and one year brokered CDs at 5.4%. Due to the latest banking crisis, the rates are starting to come down and it appears they will continue to do so. I am thinking of cancelling the autoroll on the shorter term TBills and locking in the higher 5.4% for more CDs before they go down. It helps I live in Florida and no state tax. Any thoughts on that?
I noticed many of the dates on my T-bills were wrong in Fidelity (positions->t-bill->research->details see:"Issued", Dated", "Accrual", etc. dates). They are also wrong on new issues (click on description in New Issues). Fidelity explained that the Treasury reuses CUSIPs, so the information shown may be from a past issue and not the one you actually own or are buying! Most of mine show settlement dates in 2022. Jennifer, please highlight this in one of your upcoming videos as it can cause LOTS of confusion!
I just bought my first T bill a couple of weeks ago with Fidelity, and noticed it was a reissue listed under new, with a date from December of 2022 as well. It is indeed confusing, and I haven't had much luck in finding information either.
Can we do it with Robinhood?
I'm curious if you have ever looked at ETF like TBIL. I haven't dug in enough to figure out if the returns are close to what you can achieve by directly buying TBils. If the return is close, seems like this would avoid hassle with the need to ladder, set up auto-roll (or roll on your own). Seems like another advantage would be no taxes until you sell the ETF.
Only potential issue is when you sell an ETF, you are subject to market price risk, as opposed to holding actual T bills to maturity. I don't know anything about the EFT you mentioned, but if they are holding older positions with lower yields, it is possible they could sell at a discount at the time you go to sell it.
I wonder if you chase bank bonuses, with that much capital it's not that hard to get 7-8% from most banks. For example, Wells Fargo offer for $525 / $25k nets around 8% for a 3 month hold.
Why not buy a TBIL or XBIL ETF from Fidelity
Thanks for this video. This was the first place I heard about the Schwab lag and the reason I opened a Fidelity account. Now 7 months since this video is the 17wk Tbill on auto roll now? I suppose I’ll find out soon enough
I don't know about the 17-week honestly because we buy all our Treasuries through Fidelity at the moment. If you find out, do come back & let everyone know if you get the opportunity!
bond question? well bill question? if i am building a ladder and the propper time to buy is now, and powell is giving a f.o.m.c. "speech" on the 22nd where i am pretty sure he will raise rates. Is it worth it to wait a week? will you see any change in that week? basically, do you know how long it takes for a rate hike to take effect? i mean 4.66 is good, but if i can get 5 i'll wait a week.
I thought Ameritrade was bought by Schwab, so why different policy, I wonder
Thank you for pointing out that Schwab has 1 week lag. I setup 4 week tbill ladder, and was surprised that I had 1 week hole. I would have gone with Fidelity if I had known that. Schwab also have an extremely low interest rate on the sweep account. Something like 0.45%? Does Fidelity have better interest rate on the sweep account?
I just checked 4/6/2023 Fidelity has about a 4.7% on their Brokerage sweep account while Schwab has .5%. Fidelity has a lag time too! But bcz the interest rate is better on the Sweep account, you don't feel it so much.
Are there any tax implications?
I noticed this week that 13 and 17-week T bills have almost identical rates. I don't really care about the auto-rollover feature as I'm still adding money each month and growing this money. I'm wondering if it's worth it to shift all my T bills over to 13 week from 17 when they mature. Hmmm.
can you lose money on a 3 mo tbill? i bought 1 at 5% and now it dropped to 4.9% and i see my P&L as negative? if i hold it to maturity i shouldnt be in the red right?
I recently just set up a ladder. 4-week, 8-week, & 13-week, and will roll the 4 & 8-week T-bills into 13-week upon maturity so that I have a maturing 13-week about every 4-5 weeks. Was wondering if you can set up an auto-roll on the 13's in TreasuryDirect? I didn't see that but may have to dig a little deeper.
i thought you could autoroll any maturities with TD
You can have TreasuryDirect roll any bill up to two years worth of rolls. It is also easy to change your mind, as long as you do so before the auction date.
Are T Bills at Fidelity or Schwab subject to the 250K FDIC limit or are they covered by the Fed.
The FDIC does not insure U.S. Treasury bills, bonds or notes, but these investments are backed by the full faith and credit of the United States government.
Could you please do a tutorial or add a section to your videos were you give an example of the calculation of interest earned? Like with real examples of 25 $1000 face value bonds on a 4 week 0 coupon T bill at 5.2% and how much a person would make at time of maturity and how much of that is taxable etc. the calculators in some sites are not helpful. would be greatly appreciated if you could do that. thanks in advance!
She did this in one of her earlier tutorial videos on building a T-Bill ladder. Do a search among her "t-bill ladder" videos and you'll come across it.
@@c.mikiwheeler8170 thank you. Is it the 60k tbill ladder video?
Do you think seeing 6% is possible and what would it take
Didn't think we'd see 6% in this cycle, but now that the Treasury is basically saying that the FDIC insurance limit is now unlimited, who knows?
Hi Jen, I have vanguard, can I do those strategies in vanguard too?
Yes - but Vanguard does not offer auto-roll
I have found that cd's have a better payment on short term issues. I just got 2-1 month 25k cd's this morning paying 5.1% on Ameritrade. No auto roll though. I just have to manually rebuy
How rude of me. I become so engrossed in your videos, that I forget to thumbs-up them.
Why ladder 13 week t bill when 8 week t bill has slightly higher APY?