Don’t even think about buying bank drives. Here’s why.

If you’re the type who insists on the safety of bank money market accounts and certificates of deposit, your time has finally come.

After years of waiting, you earn more than your savings. But there is a simple way to earn more risk-free: invest in US Treasuries.

Below are many reasons why you should invest in Treasury securities instead of bank deposits or savings accounts.

1. Treasuries pay more

As you’re probably aware, interest rates have been steadily rising this year as the Federal Reserve raises interest rates to suppress inflation.

Rising interest rates are showing up everywhere, including banks. But interest on Treasury bills (maturing in one year), notes (with maturities of two to 10 years) and bonds (with maturities of 20 to 30 years) now pay more than the vast majority of bank offerings, and they adjust more quickly. to increasing rates.

Take a look at CD rates in our solution center and you’ll see that 1-year CD rates range from 3.25% to 3.9%. And these are not just average rates. they are among the best in the entire country.

Now, here’s a look at the interest rates on Treasuries ranging from 1 month to 5 years in maturity since I checked this on October 11th.

  • 1 monthyield: 2.952%
  • 3 months old3.434%
  • 6 months old4.107%
  • 1 year4.264%
  • 2 years4.289%
  • 3 years4.323%
  • 5 years4.119%

As of now, you can earn over 4% on a 6-month T-bill and over 4.25% over a 1-year period, higher than the best CD rates.

As with bank interest rates, Treasury rates are constantly being adjusted. You can find current interest rates where I did here on CNBC.com or many other financial sites.

The next time the Fed raises rates, most likely at its next meeting on November 2, 2022, check Treasury rates again. They will probably be higher.

2. Treasuries are easy to buy

There are several ways to invest in Treasury securities. Here are some of the simplest.

  1. You can buy them directly from Uncle Sam at TreasuryDirect.gov. You simply open an account like an online bank account and then buy government bills, notes and bonds as they are issued. TreasuryDirect is also a great place to learn more about all types of Treasury securities, including the popular I-Bond, which is now paying over 9%.
  2. You can buy Treasury securities from most commercial banks. For details, call your bank or search for “purchase through treasury funds (name of your bank)”.
  3. You can buy Treasurys through brokerage firms such as Vanguard, Charles Schwab or Fidelity. Such broker-dealers may also sell your securities before they mature. For example, say you invest in a 5-year Treasury and need to sell before the five years are up. They will sell it for you on the secondary market. However, the price may be more or less than what you paid for it. (Generally, if rates have gone down, it will cost more than you paid. If rates have gone up, less.)

3. Treasuries are safer

Wait, CDs aren’t completely safe? Yes! By allowing you to purchase certificates of deposit through an FDIC-insured bank, your investment is guaranteed by a US government agency up to $250,000 per depositor, per insured bank, per account ownership category.

Treasuries, on the other hand, are direct liabilities of the US government. Because the government can print money, it essentially cannot default on its debt. So while CDs are insured and perfectly safe, technically direct obligations are the safest.

4. You can invest (almost) as much as you want in Treasurys

As noted above, there are limits to the insured amounts you can invest in certificates of deposit. In the case of Treasury securities, the limit is $10 million per security type and term, per auction, per family.

And since the US government is funding its massive debt forever, there will never be a shortage of securities for investment.

5. You do not pay state income tax on treasuries

Interest on certificates of deposit is taxed at both the federal and state levels. Interest on U.S. Treasury direct obligations is taxed only at the federal level; There are no government fees. If you are in a high tax bracket, this effectively increases the yield.

Bottom line. Check out Treasurys

This year has caused serious changes in the financial markets. The Fed’s attack on inflation rocked the stock market, but it created savings rates we hadn’t seen in years.

As times change, we must change with them. I’ve been investing for 40 years, but I bought my first Treasury about a month ago. Take a few minutes to explore what’s out there.

As I like to say, spending a little time now can mean spending a little more money later.

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