Banking, saving and cash · Comparison

I-bonds and T-bills:
buying them and comparing returns.

READ3 min·UPDATED·APPLIES TOUnited States·LEVELBeginner
For savers deciding where to park cash beyond a savings account. Sources are listed at the bottom of the page; check their dates before acting.

I-bonds protect against inflationinflationA general increase in prices over time, meaning each dollar buys less than it did before.Full definition. T-bills can beat your high-yield savings account, especially in high-tax states. This page covers how to buy them, the limits and lockups, and when they make sense over a HYSA.

This page covers US-specific accounts and tax law. Outside the US? The priority order is the same, the account names differ (ISAIndividual Savings Account (ISA)A UK tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition in the UK, TFSATax-Free Savings Account (TFSA)A Canadian tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition/RRSPRegistered Retirement Savings Plan (RRSP)A Canadian tax-deferred retirement account; contributions reduce taxable income and growth is tax-deferred until withdrawal.Full definition in Canada, Super in Australia, etc.).

Check before acting. Rates, prices, fees and product terms change often. Confirm the current figures with the provider or the linked source before you act.

Short answer

I-bonds: buy at TreasuryDirect.gov, $10,000 per person per year, must hold 1 year minimum, lose 3 months of interest if sold in years 1 to 5. Rate adjusts every May and November. T-bills: short-term government bonds, 4-week to 52-week maturities, bought at TreasuryDirect or via brokerage, currently competitive with HYSAs and exempt from state income tax.

I-bonds

US government savings bonds that earn a composite rate: a fixed rate (set at purchase, never changes for that bond) plus an inflation adjustment that recalculates every 6 months based on CPIConsumer Price Index (CPI)The government's measure of how much a typical basket of consumer goods costs over time.Full definition-U ×DON'T TRUST, VERIFYClaim: I-bond composite rate combines fixed rate (set at purchase) and semiannual inflation rate. Current rates posted each May 1 and November 1.Verify at: TreasuryDirect I-bond rates ↗ Source 1 in the list belowRate resets twice per year; buying window matters..

Limits

  • $10,000 per person per year via TreasuryDirect
  • $5,000 additional via IRS tax refund (discontinued January 1, 2025)
  • $10,000 per entity (business, trust) per year

How to buy

Open an account at TreasuryDirect.gov ↗. Link a bank account. Purchase. 1 to 3 business days to clear. The TreasuryDirect interface is dated and clunky. Expected. It is the official government site and it works.

Holding rules

  • Minimum hold: 1 year (you cannot sell sooner)
  • Sell before 5 years: forfeit the last 3 months of interest
  • Hold 5+ years: no early-withdrawal penalty

When they make sense

Savings beyond your emergency fund that you will not need for 12+ months. Inflation-hedgehedgeAn investment made to offset potential losses in another position, like buying gold to protect against currency declines. component of medium-term savings. Ladder purchases across tax years to build a rolling supply. They do not make sense for money you might need within a year, amounts over $10,000 per person per year, or when HYSA yields are higher than the current I-bond composite rate.

T-bills (Treasury bills)

Short-term US government securities. Maturities: 4, 6, 8, 13, 17, 26, 52 weeks. Sold at a discount to face value. You pay less than face. At maturity you receive full face value. The difference is your interest.

Where to buy

TREASURYDIRECT

Buy direct from government. No fees. Minimum $100. Auction-based: you specify dollar amount and buy at whatever auction rate clears. treasurydirect.gov ↗

FIDELITY / SCHWAB

Search "T-bill" in fixed income. Buy newly issued or secondary. No commission at Fidelity or Schwab. Easier interface than TreasuryDirect.

Tax treatment

Interest on Treasury securities is exempt from state and local income tax. Federal income tax applies ×DON'T TRUST, VERIFYClaim: US Treasury interest is exempt from state and local income tax; federal tax applies.Verify at: IRS Topic 403 ↗ Source 2 in the list below31 USC 3124 establishes the state tax exemption for federal obligations.. This makes T-bills attractive relative to HYSAs in high-tax states.

T-bill vs HYSA math, California example:

5% T-bill, no state tax: full 5% after state. 5% HYSA, 9.3% CA tax: 4.5% after state. In a 0% state (TX, FL, etc.), the two are equivalent. In high-tax states, T-bills win on equal yield.

5% yield after state tax: T-bill vs HYSA
5% T-bill, any stateexempt from state tax
5% kept
5% HYSA, California9.3% state tax
4.5% kept
5% HYSA, Texas or Florida0% state tax
5% kept
0%5% before state tax
T-bill interest keptHYSA interest keptHYSA interest lost to California's 9.3% tax
Federal income tax still applies to T-bill interest and is not shown.
The dashed slice is the part of a 5% HYSA yield that California's 9.3% tax takes, leaving 4.5%. T-bill interest is exempt from state tax, so it keeps the full 5% after state tax in any state. Where state tax is 0%, as in Texas or Florida, the two match.

Where to go from here

Do next

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The broader framework for where to park cash you're not investing.

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Sources

Verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.

  1. TreasuryDirect I-bond rates · treasurydirect.gov ↩
  2. IRS Topic 403 · irs.gov ↩
  3. TreasuryDirect (U.S. Treasury), Home — TreasuryDirect

Last updated . Not financial advice. Rates change. Verify current yields before purchase. Disclosures · How pages are reviewed

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