T-Bills / CDs
Love your segments on WGN and Garry Meier. I have some “chicken money” that I have been moving around between CDs and T-Bills. I heard in a recent interview you did that Warren Buffett has a lot of $ in T-Bills. I see rates for CDs right now that range from about 4-4.3% while the T-Bills are around 3.8%. Why would I choose T-Bills instead of the slightly higher CD rates, like Buffet is doing? Is it just the stability of government-backed securities, or is there another reason? Why pick a 3.8% T-Bill over a 4.1% CD with Marcus.com or similar bank for 6 or 14 months. On a personal note your advise about I Bonds back around the time of Covid was wonderful with those high percentage rates, THANK YOU. All the best, Terry
Terry Says
Well, you don’t pay state income taxes on T-bill interest, for starters. And you get your interest “up front”, where it can earn interest in a money market fund — effectively raising your yield a bit.
And there may be a delay — a week’s lost interest — moving CDs from bank to bank. AND, if you have a LOT of money, you have to be aware of FDIC insurance limits.
But right now the balance might be slightly tipped in favor of CDs offered by some aggressive banks. Since they are Federally insured up to the limits, no real difference here. It’s just that once you start buying and “rolling” T-bills becomes so automatic and easy. And you always know you’re getting the market rate for safety, since T-bill auctions take place weekly and reflect the world’s pricing for the world’s safest asset.
