Buying Treasury bills - great choice for cash reserves

[disneysteve]

I stand corrected and I did redeem $10,700 in 2023 so I will have to pay taxes. All that's showing now is the second round of my $10,000 purchase which is at $10,288.

That makes more sense. I’ve never heard of anyone only cashing out the face value and not the interest.

[QuarterMillionMan]

Here's my history where it says full security redeemed. I think at first I didn't want to pay the taxes yet so intended to leave the $700 but upon redemption it only allowed me to redeem the full amount so I'll pay the taxes.

[kork13]

You can do partial redemptions of i-bonds, in any amount over $25. So you could have taken out $10k if desired. But I'm pretty sure they treat interest as proportional on all redemptions. So if you redeem $10k of a $10.7k bond, they attribute 93.4% of the accumulated interest to the redemption, and you would owe taxes on roughly $654 of interest.

[skives]

It’s not easy finding T bills on the secondary market if you only want to buy one is it?

[disneysteve]

It’s not easy finding T bills on the secondary market if you only want to buy one is it?

Yes, it's quite simple. It is at Vanguard at least. What broker are you using?

For Vanguard, see the 3rd post in this thread. I posted the screen where you choose what you're looking for. It couldn't be any easier.

[skives]

Yes, it's quite simple. It is at Vanguard at least. What broker are you using?

For Vanguard, see the 3rd post in this thread. I posted the screen where you choose what you're looking for. It couldn't be any easier.

I use Fidelity. The lowest amount I saw on Fidelity was 10 bonds so $10,000 worth. I watched a YouTube video on how to buy them off Fidelity.

[disneysteve]

I use Fidelity. The lowest amount I saw on Fidelity was 10 bonds so $10,000 worth. I watched a YouTube video on how to buy them off Fidelity.

There can be specific issues that have a minimum, or a maximum, but it shouldn’t be hard to find plenty that don’t.

[skives]

There can be specific issues that have a minimum, or a maximum, but it shouldn’t be hard to find plenty that don’t.

Must just depend on when you look. I just found some that were 1 bond.

Am I correct in saying the secondary market is for people that bought bonds from the government and don’t want them anymore?

[disneysteve]

Must just depend on when you look. I just found some that were 1 bond.

Am I correct in saying the secondary market is for people that bought bonds from the government and don’t want them anymore?

They could have been bought at issue or in the secondary market. People liquidate holdings for all sorts of reasons.

[skives]

What do you guys think if someone has an extra $10k they don’t need to use that to buy 20 year bond at 5.2% to save for a future car purchase? Or would that money be better suited for retirement?

[disneysteve]

What do you guys think if someone has an extra $10k they don’t need to use that to buy 20 year bond at 5.2% to save for a future car purchase? Or would that money be better suited for retirement?

I think your investment should match up with your timeline. When do you anticipate buying the car? I wouldn’t tie up the money in a 20-yr bond if you’ll be buying in 4 or 5 years. Don’t use a long term investment for a short term need.

[skives]

I think your investment should match up with your timeline. When do you anticipate buying the car? I wouldn’t tie up the money in a 20-yr bond if you’ll be buying in 4 or 5 years. Don’t use a long term investment for a short term need.

No this would be for a car in 20 to 25 years from now.

[disneysteve]

No this would be for a car in 20 to 25 years from now.

You’re planning your car purchase 20-25 years in advance? That’s a lot.

With a 20+ year horizon before you need the money I’d probably be putting it in equities. I wouldn’t set aside a big chunk of cash today that I won’t need for 2 decades. Now when it’s down to 4 or 5 years I might set it aside somewhere safe to protect the principal.

[kork13]

I'm not an expert with bonds, and my bond exposure is admittedly very low (and only via MF). But the only reason I'd be buying a long-term bond like that is to provide steady, reliable income ... most likely in retirement. That said, as a strategy within your overall portfolio, having some long-term bonds are not necessarily a bad thing. I just wouldn't earmark the money for something like a car or really any specific purchase. If you want to use a long term bond, just consider it a part of your big picture, and use it to offset overall portfolio risk & growth.

[disneysteve]

I'm not an expert with bonds, and my bond exposure is admittedly very low (and only via MF). But the only reason I'd be buying a long-term bond like that is to provide steady, reliable income ... most likely in retirement. That said, as a strategy within your overall portfolio, having some long-term bonds are not necessarily a bad thing. I just wouldn't earmark the money for something like a car or really any specific purchase. If you want to use a long term bond, just consider it a part of your big picture, and use it to offset overall portfolio risk & growth.

I agree. I've gotten much bigger into bonds over the past 2 years but I'm also all but retired so more focused on generating income from our portfolio. We're still 60% stocks but that's down a lot from several years ago. Also, with interest rates up over 5% now, the bonds are far more attractive. When I crunched the numbers for me to cut back at work, I used a 2% return on fixed income. By the time I actually made the change, rates were creeping over 3%. Now a year or so later, most of our bonds and CDs are paying over 4% and a lot over 5%.