I-Bond and Treasury Bill Calculator (US)

Treasury Securities Guide

Why Treasuries Beat CDs in High-Tax States?

US Treasury securities (T-Bills, T-Notes, T-Bonds, I-Bonds, EE-Bonds) are EXEMPT from state and local income tax. Federal tax still applies. In California (13.3% top rate), New York City (~14.7% combined), New Jersey (10.75%), Hawaii (11%), Oregon (9.9%), this is huge. Example: 4.5% T-Bill in California. After 35% federal: 2.925% after-tax. Equivalent CD at 4.5% in California: after 35% fed + 13.3% state = 2.34% after-tax. The Treasury wins by 0.58% just on state tax exemption — over $580/year per $100,000 invested, purely from the state tax exemption Treasuries enjoy that ordinary bank CDs don't.

What's the key thing to understand about Series I Savings Bonds — Inflation Protection?

I-Bonds offer two-component interest: fixed rate (set at issuance, lasts 30 years) + inflation rate (adjusts every 6 months based on CPI-U). 2024 composite rate variations: late 2022 spike at 9.62% drove massive interest; 2024-2025 typically 3-5% range. Annual purchase limit: $10,000 per person via TreasuryDirect + up to $5,000 paper bonds with tax refund. Married couples + trusts can each buy $10k. Hold requirements: must hold at least 12 months. Withdraw between months 12-60: forfeit the last 3 months of interest, which is the only real penalty for accessing I-Bond money before the full 5-year holding period.

What's the key thing to understand about T-Bills — The Forgotten Cash Alternative?

Treasury bills are short-duration zero-coupon Treasury securities sold at discount, matures at face value. Difference = your yield. Maturities: 4, 8, 13, 17, 26, 52 weeks. Minimum purchase: $100. Buy via TreasuryDirect.gov, Vanguard, Fidelity, Schwab brokerage. Brokerage T-Bills: easier interface, can ladder automatically, ETF wrapper available (SGOV, BIL, USFR). TreasuryDirect: government direct, no fees, slightly higher yield in some cases. Why most Americans don't use them: the government TreasuryDirect website has a reputation for being clunky and unintuitive compared to a modern brokerage or bank app, which puts many people off despite the genuine advantages.

What do I need to know about Setting Up TreasuryDirect Account?

Process: create account at TreasuryDirect.gov (10 minutes), link your bank account (verification 1-2 weeks via signature guarantee in problematic cases). Buy securities directly: I-Bonds, T-Bills, T-Notes, T-Bonds, TIPS. Quirks: account locks require paper signature guarantee to reset (don't lose login). No mobile app. No transfer to brokerage without account closure. Workaround: most investors use brokerage Treasury access (Vanguard, Fidelity, Schwab) for T-Bills/Notes, only TreasuryDirect for I Bonds, which can't be purchased through a regular brokerage account.

What's the key thing to understand about How I Bonds Protect Against Inflation?

Series I savings bonds combine a fixed rate, set when the bond is purchased and held for the bond's life, with an inflation-adjusted rate that resets every six months based on the Consumer Price Index. The two combine into a composite rate, so the bond's return automatically rises when inflation rises and falls when inflation falls, protecting the real purchasing power of the money invested in a way a fixed-rate savings account cannot. I bonds must generally be held for at least one year before any redemption, and redeeming before five years forfeits the last three months of interest as an early withdrawal penalty — so they suit money that can be set aside for at least a year, ideally longer, rather than an emergency fund that might need to be accessed within months. Interest is exempt from state and local tax, and can be exempt from federal tax too if used for qualified higher education expenses, which makes I bonds particularly attractive to some savers compared with ordinary taxable savings accounts, though there's an annual purchase limit per person that constrains how much can be allocated to them each year.

What should I know about T-Bills and the Yield Curve?

Treasury bills are short-term U.S. government debt with maturities typically ranging from four weeks to one year, sold at a discount to face value — the return comes from the difference between the discounted purchase price and the full amount paid at maturity, rather than periodic interest payments. Because they're backed by the full faith and credit of the U.S. government and are extremely short-term, T-bills are considered among the safest and most liquid investments available, commonly used for short-term cash parking where capital preservation matters more than maximising return. Their yields are heavily influenced by the Federal Reserve's target interest rate and expectations about future rate moves, which is why T-bill rates can shift noticeably around Fed meetings. The relationship between yields on different maturities — the yield curve — is also closely watched by economists: normally longer-term bonds yield more than short-term ones to compensate for locking money up longer, but when short-term yields exceed long-term yields (an 'inverted' yield curve) it has historically often, though not always, preceded an economic slowdown, which is one reason T-bill rates get more financial media attention than their short maturity might otherwise suggest.

Worked Example: 6-Month T-Bill vs a High-Yield Savings Account

Suppose a 6-month Treasury bill is auctioning at a discount that produces an annualized yield of roughly 5.0%, while a high-yield savings account pays 4.5% APY. On $10,000 held for six months, the T-bill would generate approximately $250 of interest (5.0% annualized for half a year), compared to about $225 from the savings account (4.5% for half a year), a modest edge before tax. The bigger difference shows up for residents of high-tax states: Treasury interest is exempt from state and local income tax, while savings account interest is fully taxable at both federal and state levels. For someone in a state with a 9% state income tax, that exemption alone is worth roughly $22.50 of extra after-tax value on this example, on top of the already higher pre-tax yield — meaning the effective after-tax advantage of the T-bill can be noticeably larger than the headline rate gap suggests. Always compare current T-bill auction yields (available at TreasuryDirect) against current savings account APYs rather than relying on older figures, since both move with the broader interest rate environment.

I Bonds, T-Bills, and CDs at a Glance

Each of these cash-like instruments suits a different goal, and the right choice typically depends on how soon the money is needed and whether inflation protection matters.

As a general guide, I bonds suit long-term inflation-protected savings you won't need for at least a year, T-bills suit short-term cash earmarked for a known near-term expense, and CDs can be competitive when their fixed rate beats current T-bill and I bond rates for a similar term — always check current rates for all three before choosing, since relative attractiveness shifts with the rate environment.

Understanding the I Bond's Composite Rate

An I bond's interest rate is made up of two separate components that combine to form the 'composite rate': a fixed rate, set when the bond is purchased and locked in for the life of that specific bond (up to 30 years), and an inflation rate, which adjusts twice a year based on changes in the Consumer Price Index and applies uniformly to all I bonds regardless of when they were purchased. This means two I bonds purchased in different months can end up with meaningfully different total returns over their lifetimes, purely because of the fixed-rate component locked in at purchase — a bond bought when the fixed rate was 0% behaves very differently over decades than one bought when the fixed rate was 1%+, even though both receive the same inflation adjustments going forward. The composite rate can never go below zero, even if inflation turns sharply negative (deflation), which provides a built-in floor that regular inflation-linked investments don't always offer. Because the fixed rate changes based on when Treasury sets it (reviewed each May and November), check the current fixed rate before purchasing if you're comparing today's purchase against bonds bought in a different rate environment.