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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35339  
Subject: Re: Inflation/Crash Insurance Date: 7/19/2006 4:36 PM
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I noticed there are some CDs out there with better returns. Do t-bills have a better return after taxes? Is that why you recomed them and not CDs?

The choice between Treasuries and CDs of any maturity always depends on your personal tax situation and what is available at any given moment.

You avoid state and local taxes with Treasuries (including T-bills), so you need to multiply the APY on a CD by state and local taxes and subtract that from the APY (although if you itemize deductions that also needs to be factored in, and if you itemize deductions but don't get to do that complete, that needs to be factored in—figured I'd beetter mention that or someone would complain: lot of perfectionists on this board).

There aren't 1 year Treasuries, so if you don't want to roll over 6 month T-bills or buy a Treasury on the open market for a commission with 1 year left, you would need a 1 year CD.

A couple of years ago, it was almost always possible to find CDs or any maturity that won, even after taxes, over Treasuries of any maturity. Over the last 6 months or so, it has been neck and neck, except occasionally you could get a comparatively great rate on a CD. We're seeing more comparatively good rates on CDs again of late.

The advantage of doing Treasuries via T-direct is convenience. Unless you can find a particular bank of credit union with consistently high end CD rates of all relevant maturities (my credit union has been good for 5-years but not on short end), to chase good CD rates, you may end up needing to set up many different accounts. The amount of extra return you are going to get over a couple of years is a few extra beers and pizza (and not that at current pizza prices, at least edible pizza, and I live in a highly competitive pizza zone).
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