Does your Retirement Portfolio have T-Bills?

If your portfolio contains T-Bills, some good news, it is the first time in 15 years that investors can earn nearly 4% on U.S. Treasury notes, while returns on some money-market funds have reached 2% and are set to rise further. At the beginning of 2024, these yields were almost nonexistent.

The rate increase benefits previously yield-starved savers who have struggled with sub-1% short-term rates for the last decade and a half. In the coming year, savers may finally see favorable inflation-adjusted rates. While consumer prices rose 8.3% over the previous year, the most recent monthly readings were close to zero.

The increased revenue from the massive pool of money-market funds and other short-term bond holdings might potentially help the economy. One loser is the United States government, which is paying more interest on its debt.

Other cash-rich businesses that benefit from increased short rates include Berkshire Hathaway (ticker: BRK/A, BRK/B), Apple (AAPL), Alphabet (GOOG, GOOGL), and Microsoft (MSFT).

Approximately $100 billion in cash and equivalents were held by Berkshire Hathaway at the end of June, including about $76 billion in Treasury bills. Warren Buffett, the risk-averse CEO of Berkshire Hathaway, prefers to hold most of Berkshire’s capital in T-bills.

Berkshire’s cash assets now provide more than $3 billion in yearly income, up from practically nothing in 2021 when T-bill rates were slightly around zero. On June 30, Apple had $179 billion in cash and equivalents, Microsoft had $105 billion, and Alphabet had $125 billion (including marketable securities).

The rise in short-term interest rates reflects the Federal Reserve’s decision this year to raise the primary fed-funds rate from near zero to a current range of 2.25% to 2.5%. The Fed will likely raise interest rates by 0.75 percentage points at its next policy meeting. Bond market participants expect the Funds rate to exceed 4% by the end of the year, according to the CME FedWatch tool.

According to Bloomberg, investors may receive 3.18% on three-month T-bills, 3.78% on six-month T-bills, and 3.92% on one-year bills. The one-year T-Bill has one of the highest Treasury rates, and the 10-year note, for example, yields 3.4%.

Individuals can purchase T-bills via banks and brokerage companies and directly from the U.S. Treasury through the TreasuryDirect program. Three- and six-month bills are auctioned weekly on Mondays, while one-year bills are auctioned every four weeks.

T-bill interest is excluded from state and local taxes, which is a positive in areas like New York and California, where top income-tax rates surpass 10%. T-bills perform better in comparison to bank savings accounts and C.D.s. According to, the highest-yielding one-year CD yields over 3%, while the average one-year rate is around 0.5%.

Individual investors can also purchase T-bills through liquid exchange-traded funds such as the $23 billion iShares Short Treasury Bond ETF (SHV), which holds Treasuries with an average maturity of around four months, and the $20 billion SPDR Bloomberg 1-3 Month T-Bill ETF (BIL).

According to SEC methodology, the iShares SHV ETF has a 30-day yield of 2.5%. The SPDR Bloomberg BIL ETF has an SEC yield of 2%.

Investors wanting to take on a little greater interest-rate risk might purchase the iShares 1-3 Year Treasury Bond ETF (SHY), which has an average term of roughly two years and an SEC yield of 3.3%. The $42 billion Vanguard Short-Term Corporate Bond ETF (VCSH) has an SEC yield of more than 4% and an average maturity of three years. The Vanguard fund invests in investment-grade corporations, most of which have single-A or triple-B ratings.

“Investors realize that when the Fed raises rates, the ETF portfolios will flip over, and the bonds entering the portfolio will come in at higher yields,” says Steve Laipply, the U.S. head of bond ETFs at BlackRock, which owns iShares. This should enhance bond ETF yields, particularly those with shorter maturities.

Investors have poured money into Treasury ETFs this year to take advantage of the significant rate increase. According to iShares, the iShares SHV ETF has received $10 billion this year, while the iShares SHY ETF has received $6 billion.

Money-market fund rates are also growing. The massive $216 billion Vanguard Federal Money Market Fund (VMFXX) currently has an SEC yield of 2.15%, which will rise further.