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Great question! The interest earned from Brokered T-Bills (Fidelity/Vanguard/Schwab etc) should be exempt from state and local taxes as well!

Great question, Ed! For this video, CDs refer to certificates of deposits that are purchased via a broker (in this case, Merrill Edge). You can also buy brokered CDs through Fidelity, Schwab, and more!

Great question!! It seems like a perfectly fine Money Market Fund (provided there are no fees to trade it with your broker). 5.11% yield with just a 0.3% expense ratio is not too shabby!

Great question! CDs are initially sold at Face Value. So if I purchase $10,000 worth of CDs, my initial deposit is $10,000, and I will receive $10,000 + $X interest back on maturity date. On the other hand, Treasuries are sold at a discount, so the initial deposit would be < $10,000 with exactly $10,000 returned on maturity date. Merrill Edge uses the same tools to describe both types of investments, so that’s how the offer prices differ!

Very solid plan Frederick!!

My pleasure!

Great question! You can find how long your T-Bill is “locked” for by looking at its Maturity Date. A new T-Bill that matures ~3 months from today is likely 13 weeks. If you’re interested in learning more about the Treasury Bill offering itself, each one has a unique CUSIP code that you can cross reference with Treasury Direct. Some Treasuries sold on the secondary market can be longer term securities (eg a previously issued 52-week T-Bill at the start of 2024 might be sold on the open market, even though it matures at the end of December) Hope that answered your question!

@@EricTangOfficial Thank you Eric. So I checked yesterday, and it said that I could purchase a new issue that would mature 8/22/24. And then under the issue date it said, 2/22/24. so this is why i was confused. if it's a new issue, then how was it already issued. Just wanted to get your thoughts on this. this seems like a 6 month t bill. i was hoping to purchase 1 month t bill. thank you

For simplicity, a pre-existing Treasury that matures on 08/22/24 functionally behaves as a ~ 6-week Treasury bill. If the yields are the same, it's functionally no different from buying a newly issued 4/8-week T-Bill on Treasury Direct. But to answer your question as to why the Treasury was originally a 6 month T-Bill, that comes down to the difference between "Competitive Tender" and "Non-competitive Tender" when Treasuries are first sold. Treasuries are actually sold to both institutions (competitive) and regular folk like you and me (non-competitive). Non-competitive bids constitute a very small percentage of the Treasury as we collectively don't have a lot of money. However, institutions will purchase Treasuries in very large quantities (e.g. Warren Buffet's Berkshire Hathaway in the millions of $$$) as they are much safer and more capable than bank equivalents. Fidelity is a large institution, so they can purchase large amounts of Treasuries via competitive bids at more attractive prices. Fidelity can then sell these Treasuries to their clients via "newly issued" Treasury Bills section or your normal Money Market Funds. It's a standard industry practice, and so these Treasuries retain all of their protections and properties as newly issued Treasuries. The only difference is from when/how they were purchased, which functionally has no impact on investors like you and me. Sorry if that complicates a little bit further! Treasuries are actually very complex financial instruments, but I try to simplify it to highlight the most important concepts. Very good question though & I'm glad you want to know the complicated details!

Oh wow. What a great detailed answer. Really appreciate it. So in this case, if I were to auto roll, it would be for 6 months, not 6 weeks correct? This is almost like buying on secondary market but from institutions

Good question Lila! The Treasury that matures on 08/22/24 is a re-issue of a previously issued bill. Because there are ~ 6 weeks left from the maturity date, Fidelity's Auto-Roll feature will prioritize rolling into another 6-Week Treasury security. Because it's at a weird number (not 4 or 8-weeks), Fidelity might purchase another re-issue the next time. If it cannot find a suitable alternative, they may automatically cancel the Auto-Roll. We're in a week with a federal holiday (July 4th) on a Thursday, so newly issued Treasuries are funkier due to auction/issue dates & business times. The schedule should resume normally next week.

Great question! Vanguard should not be charging any commission fees for any Treasury purchases!

Much love!! ❤️

very good points!

Thanks so much! Love the profile pic!

Great question! The 3 month penalty is already calculated & reflected in your I-Bond balance. For example, if you observe the balance of a recently deposited I-Bond, you'll notice that it "does not earn any interest" for the first 3 months. At the 5 year mark, you may notice a "sudden spike in interest" because the 3 month penalty is lifted, increasing your nominal I-Bond value significantly. The government wants to insure you pay your penalty, so they'll take it automatically instead of waiting for us nice folk to report it on our taxes!

@@EricTangOfficial I see. The government is more steps ahead 😆. Thanks for your reply.

Great question! I've been planning on making a video on the best Treasury Bill ETF's, and I'd agree with you that an ETF like SGOV is very attractive! They're a bit more complicated in that buying/selling can incur capital gains taxes, which disrupts a little bit of the tax treatment. Moreover, a small percentage (3-4%) of the fund is not held in US government obligations, which also a bit more complexity. Overall though, if you're working with a great broker, these are likely automatic calculations done for you. But if a broker is less than adequate, perhaps some things may be slightly off come tax time. Generally speaking, those ETFs are definitely interesting!

Great question! If you purchase through Treasury Direct, a 1099-INT is issued for Treasuries specifically. If you purchase via a broker, there may be capital gains associated if you sell Treasuries before the maturity date, and so other forms may be present as well.

Great question & sorry for the late reply, Gisselle! I've touched on in mostly in the comments for other viewers and don't remember if i have a dedicated video for it. But here's the tl;dr: Interest income received on Treasury Bills is recorded via a Form 1099-INT at the end of the year. This is the form you use when working on your federal taxes. No state tax is owed on Treasuries so they are not reflected in your state taxes.

I haven't found any reputable broker that accepts Treasury Bill purchases via a credit card. If there is one, feel free to let me know!

Great question! Generally, the interest earned from Treasury Bills held to maturity is taxed as "interest income." Capital gains are only applicable if you sell Treasuries before the maturity date.

Excellent point, Keith! The IRA is truly a special account!

Good question & sorry for the late reply, John! Fidelity has a weird system where money in a money market fund may be locked/used to purchase a new Treasury, even before the previous one is fully redeemed and settled into your cash balance. I'm not sure if this is as intended or simply a mistake on their part, but others online have also noted similar issues.

Sounds like a solid plan, Mike! 4-Week Treasury Bills are definitely a great option for knowledgable savers like yourself!

Great question! You'll be issued a 1099-INT by January 31st of the following year in which you redeem the I-Bond.

For I-Bond redemptions, a 1099-INT will be issued by January 31st come tax season. TreasuryDirect does not provide paper savings bonds or paper account statements. If you do want a paper copy of your account information though, you can use the browser's toolbar to print the relevant pages in your account that show your holdings.