How to Buy Treasury Bills and Earn 4%+ Risk-Free

I'll admit it: for years, I ignored Treasury bills. They sounded like something my grandparents would own, tucked between their war bonds and savings passbooks. Then I actually looked at the numbers. A 1-year T-bill yielding over 4%, backed by the U.S. government, exempt from state income tax? That got my attention fast.

If you've been parking your cash in a high-yield savings account and feeling good about it, T-bills deserve a second look. They're not exotic, they're not complicated, and in today's rate environment, they can quietly outperform your HYSA on an after-tax basis.

What Are Treasury Bills, Exactly?

Treasury bills are short-term IOUs from the U.S. government. You lend Uncle Sam money for anywhere from 4 weeks to 52 weeks, and he pays you back at face value when the bill matures. The catch (and it's barely a catch) is that you buy them at a discount. So you might pay $975 for a bill worth $1,000 at maturity. That $25 difference is your return.

Because they're backed by the full faith and credit of the U.S. government, T-bills carry essentially zero default risk. The FDIC insures your savings account up to $250,000. T-bills have no cap at all. If you're sitting on more than $250,000 in cash (or even if you're not), that distinction matters.

Why T-Bills Make Sense Right Now

The Federal Reserve has held its target rate steady at 3.50% to 3.75% through 2026, according to the Fed's most recent policy statement. Meanwhile, longer-dated Treasury yields have climbed sharply. The 10-year Treasury yield hit 4.79% in early September 2026, per Federal Reserve data, and the 1-year Treasury sits around 4.12%.

Compare that to high-yield savings accounts. The best HYSAs in September 2026 top out at about 4.10% to 4.21% APY, according to Bankrate and NerdWallet. On the surface, they look similar. But there's a tax angle that tips the scales.

The State Tax Exemption

T-bill interest is exempt from state and local income tax. HYSA interest is not. If you live in California (state tax rate of 9.3%), New York (up to 10.9%), or any other high-tax state, this matters more than you'd think.

Here's the math for a California resident:

A 4.10% HYSA yield becomes roughly 3.72% after California state tax. A 4.12% T-bill yield stays at 4.12% because the state can't touch it. That's a 40-basis-point gap on identical nominal rates. On $50,000 in cash, that's about $200 more per year in your pocket. Not life-changing, but not nothing either.

If you live in a state with no income tax (Texas, Florida, Nevada, and a few others), this advantage disappears. The HYSA is probably simpler for you.

Three Ways to Buy T-Bills

1. TreasuryDirect (Buying Straight From the Source)

TreasuryDirect.gov is the Treasury Department's online portal. You can buy T-bills directly from the government with no fees and no middleman. The minimum purchase is $100, in $100 increments.

Setting up an account takes about 15 to 30 minutes, plus a few days for identity verification. Once you're in, you select "BuyDirect," choose "Bills," pick your term (4-week, 8-week, 13-week, 26-week, or 52-week), and submit a non-competitive bid. That means you accept whatever rate the auction produces. Individual investors almost always use non-competitive bids, and you're guaranteed to get your full amount.

The downside? The website feels like it was built in 2003, because it was. Navigation is clunky, and selling before maturity is a pain (you'd have to transfer the bill to a brokerage first). But for buy-and-hold T-bill investing, it works fine.

2. Your Brokerage Account (Easiest for Most People)

If you already have an account at Fidelity, Schwab, or Vanguard, you can buy T-bills there with no commission. Look for the "Fixed Income" or "Bonds" section, search for Treasury bills, and you'll see upcoming auctions plus existing bills available on the secondary market.

The minimum is usually $1,000 face value at a brokerage. You can buy at auction (same non-competitive bid as TreasuryDirect) or buy existing T-bills that other investors are selling. The secondary market gives you more flexibility on exact maturity dates.

This is probably the best option for most people. You don't need a separate account, you can see your T-bills alongside your other investments, and selling before maturity is straightforward.

3. T-Bill ETFs (Maximum Flexibility, Slight Trade-Off)

If you want T-bill exposure without managing individual bills, a few ETFs do the work for you:

SGOV (iShares 0-3 Month Treasury Bond ETF) holds a basket of very short-term T-bills with an expense ratio of 0.09%. BIL (SPDR Bloomberg 1-3 Month T-Bill ETF) is similar at 0.14%. You buy and sell them like any stock, and they pay monthly distributions.

The trade-off is that you don't lock in a specific yield. The ETF's return floats with current rates. You also pay that small expense ratio, and the state tax exemption on T-bill interest gets complicated inside an ETF (some states honor it, some don't). For pure simplicity and daily liquidity, though, ETFs are hard to beat.

How to Build a T-Bill Ladder

A T-bill ladder is the fixed-income version of not putting all your eggs in one basket. Instead of buying one big T-bill, you spread your money across several maturities so that a portion comes due regularly.

Say you have $40,000 you want to keep safe but productive. You could split it four ways:

$10,000 in 4-week T-bills (matures in one month). $10,000 in 13-week T-bills (matures in three months). $10,000 in 26-week T-bills (matures in six months). $10,000 in 52-week T-bills (matures in one year).

As each tranche matures, you reinvest it in a new 52-week bill. After 12 months, you'll have $10,000 maturing every quarter, which gives you regular access to cash while keeping the rest locked in at whatever yield was available at purchase.

This protects you if rates drop (your longer bills are still earning the old, higher rate) and gives you flexibility if rates rise (your maturing bills can be reinvested at the new, higher rate).

T-Bills vs. CDs: A Quick Comparison

Both T-bills and CDs lock your money up for a fixed term at a fixed rate. But there are a few differences worth knowing.

T-bills are state-tax-exempt; CDs are not. T-bills are liquid on the secondary market if you buy through a brokerage; CDs usually charge an early withdrawal penalty. T-bills have no default risk at any amount; CDs are safe only up to the $250,000 FDIC limit per depositor, per bank. On the other hand, CDs sometimes offer slightly higher rates than equivalent-term T-bills, especially promotional rates from online banks.

If you're investing under $250,000 and live in a low-tax or no-tax state, it's mostly a coin flip. Go with whichever is simpler for your situation.

What to Watch Out For

T-bills are about as boring and safe as investing gets, but there are a couple of things to keep in mind.

First, reinvestment risk. If you buy a 52-week T-bill at 4.12% and rates drop to 3% by the time it matures, your next bill will earn less. That's the flip side of the rate-drop protection a ladder provides.

Second, inflation risk. A 4% return is great when inflation is 2%. It's less great when inflation is 4%. T-bills won't keep up with a sustained inflation spike the way TIPS or I-bonds might. The September 2026 bond sell-off was partly driven by renewed inflation fears after an oil-price shock, according to CNBC, so this isn't a hypothetical concern.

Third, opportunity cost. Money in T-bills isn't in the stock market. Over long time horizons, stocks have historically returned around 7% to 10% annually after inflation. T-bills are for money you need to keep safe and accessible in the next one to twelve months, not for your retirement portfolio.

The Bottom Line

Treasury bills are one of those rare financial products that actually deliver what they promise: a predictable return, backed by the safest borrower on earth, with a small but real tax advantage. You can buy them in 15 minutes through a brokerage account you probably already have.

They won't make you rich. They're not supposed to. But if you're holding cash in a savings account and you live in a state with income tax, you're probably leaving money on the table. Run the after-tax math for your state, and if T-bills come out ahead, consider moving some of your cash reserves over. Your future self will appreciate the extra few hundred dollars.