Treasury Bills in 2026: How to Earn More Than a Savings Account with No Risk
Treasury bills are one of the most overlooked tools in personal finance. They're issued by the U.S. government, backed by the full faith and credit of the United States, and in 2026 they're paying competitive yields with essentially zero risk of default.
For money you need to keep liquid — an emergency fund extension, a down payment you're saving toward, or cash you plan to invest in 6-12 months — T-bills are worth understanding.
What Are Treasury Bills?
Treasury bills are short-term debt instruments issued by the U.S. Treasury with maturities of:
- 4 weeks (1 month)
- 8 weeks (2 months)
- 13 weeks (3 months)
- 17 weeks (~4 months)
- 26 weeks (6 months)
- 52 weeks (1 year)
You buy them at a discount and receive face value at maturity. The difference is your return.
Example: A $10,000 face-value 26-week T-bill purchased at $9,775 returns $10,000 in 6 months — a gain of $225, equivalent to ~4.6% annualized.
T-Bill Yields vs. Savings Accounts in 2026
T-bill yields move with the federal funds rate. As of early 2026:
| Instrument | Typical Yield |
|---|---|
| Big bank savings | 0.01-0.50% |
| High-yield savings (online banks) | 4.0-4.5% |
| 3-month T-bill | ~4.2-4.8% |
| 6-month T-bill | ~4.3-4.9% |
| 12-month T-bill | ~4.0-4.6% |
Note: Yields change constantly. Check TreasuryDirect.gov or a financial news site for current rates.
T-bills often match or slightly exceed HYSA rates, particularly for 3-6 month terms.
State Tax Advantage
T-bill interest is exempt from state income taxes. This is a significant advantage over HYSAs:
- If you're in a high-tax state like California (up to 13.3%), New York (up to 10.9%), or Oregon (up to 9.9%), the after-tax yield on T-bills can be meaningfully higher than HYSAs.
Example: You're in the 24% federal bracket and 6% state bracket.
- HYSA at 4.5% APY: After-tax yield = 4.5% × (1 - 0.30) = 3.15%
- T-bill at 4.5% APY: After-tax yield = 4.5% × (1 - 0.24) = 3.42% (no state tax)
That's a 0.27% difference, or $270/year on $100,000.
How to Buy T-Bills: TreasuryDirect
The most direct way to buy T-bills is through TreasuryDirect.gov, the U.S. Treasury's website.
Step 1: Create a TreasuryDirect Account
- Go to TreasuryDirect.gov
- Click "Open an Account"
- Enter your SSN, name, address, bank account info
- Set up a password and security questions
- You'll receive your account number by email
The process takes about 15 minutes.
Step 2: Navigate to Buy T-Bills
- Log in → BuyDirect
- Select Bills
- Choose the term (4-week, 13-week, 26-week, etc.)
- Enter the purchase amount (minimum: $100, increments of $100)
- Select your bank account for funding
- Choose the reinvestment option (auto-roll for ladder strategies)
Step 3: Auction vs. Secondary Market
TreasuryDirect uses competitive auction pricing. You submit a "noncompetitive" bid, meaning you accept whatever yield the auction determines. This is almost always a good deal — the Treasury auctions weekly.
Auction schedule:
- 4-week, 8-week: Every Tuesday
- 13-week, 26-week: Every Monday
- 52-week: Every 4 weeks
T-Bills Through Your Brokerage
You can also buy T-bills through Fidelity, Vanguard, Schwab, or TD Ameritrade — often more conveniently than TreasuryDirect:
- Open the bond trading section
- Search for "Treasury" or "T-bill"
- Filter by maturity and buy at market or auction
Advantage: Same account as your other investments, easier interface, can sell before maturity.
Disadvantage: May have brokerage transaction fees (most major brokerages charge $0 for treasuries).
T-Bill Laddering Strategy
A T-bill ladder ensures you always have cash coming due while maximizing yield:
Example: 4-rung ladder with $20,000
| Purchase | Amount | Maturity | When to reinvest |
|---|---|---|---|
| Rung 1 | $5,000 | 13-week (3 months) | Every 3 months |
| Rung 2 | $5,000 | 13-week (3 months, offset 1 month) | Every 3 months |
| Rung 3 | $5,000 | 13-week (3 months, offset 2 months) | Every 3 months |
| Rung 4 | $5,000 | 26-week (6 months) | Every 6 months |
Every month, one T-bill matures and you receive cash. If you don't need the money, reinvest it. If rates have changed, you can buy a different term.
TreasuryDirect supports auto-reinvestment: check "Reinvest upon maturity" and it automatically purchases the same term at the next auction.
When Not to Use T-Bills
If you need same-day liquidity: T-bills at TreasuryDirect take 1-2 business days to access at maturity. HYSAs are faster. Brokerage T-bills can be sold before maturity, but you may get slightly less than face value.
If your state has no income tax: The state tax advantage disappears in Texas, Florida, Nevada, Washington, and other no-income-tax states. HYSAs with competitive rates may be equivalent or better.
If rates fall significantly: If the Fed cuts rates aggressively, HYSA rates often adjust slowly while T-bill rates follow the new rate immediately at each auction. Longer-term bonds might be better for locking in rates.
T-Bills vs. I Bonds vs. Money Market Funds
| Option | Liquidity | Rate source | Tax treatment |
|---|---|---|---|
| T-bills | Daily (brokerage), 1-2 days (TreasuryDirect) | Auction rate | Federal only |
| I Bonds | 1 year lock, then free | CPI + fixed rate | Federal only, deferred |
| HYSA | Immediate | Bank sets rate | Federal + state |
| Money market fund (VMFXX, etc.) | Same-day | Fed funds rate | Varies (some state-exempt) |
I Bonds are excellent for inflation protection but have a $10,000/year purchase limit and a 1-year lock-up. Money market funds holding treasuries (like Vanguard's VMFXX) are effectively the same as T-bills but more liquid.
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