Get paid even more on your cash holdings with this strategy
Income-seeking investors can pick up a little more interest on their cash by laddering T-bills.
TL;DR
- Rising Treasury yields offer opportunities for income-focused investors.
- Laddering Treasury bills (maturities of a year or less) can boost portfolio income.
- This strategy involves buying T-bills of different maturities and reinvesting as they mature.
- Laddering diversifies interest rate risk, especially in a rising rate environment.
- T-bill ladders can provide natural cash flow for short-term needs or specific goals.
- Interest on Treasurys is taxable federally but exempt from state and local taxes.
- Longer-dated issues (beyond five years) may increase interest rate risk.
- Treasury-inflation protected securities (TIPS) and municipal bonds can also generate income.
- Municipal bonds offer tax-free income at federal, and potentially state and local, levels.