TREASURY BONDS
I will be 65 in February. With some chicken money, I am considering the purchase of a treasury bond paying 4.25% that would expire in 2040. Semi-annual interest payments. I understand that if I have a broker cash it in before mature it can be lower percentage if interest rates are higher at that time. Pay only federal taxes, no state tax. Another option is a CD at 9 mos. is 4.02%
Thank you Terry!
Terry Says
Wait, why would you buy any Treasury security through a broker?? You should do that on your own, through TreasuryDirect. Read this article.
Second of all, that’s not the right yield. Currently 20-year Treasury bonds are yielding about 4.5%. An outstanding bond with a 15 year maturity would yield a bit less. Ten-year bond are yielding 4%.
Chicken money does NOT go out beyond two years. Invest for longer, and you run the risk that interest rates could rise because of inflation. And if you have to sell, you’ll get less than the face value or purchase price.
At this stage of life, I would consider laddering — staggered purchase — of 6 month T-bills, with perhaps a 2 year note purchase as well. And all of that is explained in the above article.
And forget the broker who tried to sell you this product to earn a commission!
