8. Treasuries
Investors need more cash for Treasuries than for savings bonds. Purchased through the Federal Reserve or a brokerage house, there are three types: Treasury bills, Treasury notes and Treasury bonds.
Who's It For?
Generally, "Treasuries appeal to retirees and people looking for a little income and a safe investment," says Barry Picker, partner in New York-based Picker, Weinberg & Auerbach CPAs.
"For the most part, people who have Treasuries and CDs tend to be retirees," he says.
Since all three types are backed by the federal government, the investments carry the reputation of being safe and secure. And the exemption from state tax makes them attractive to retirees and people living in areas with high state income taxes.
Who's It For?
Generally, "Treasuries appeal to retirees and people looking for a little income and a safe investment," says Barry Picker, partner in New York-based Picker, Weinberg & Auerbach CPAs.
"For the most part, people who have Treasuries and CDs tend to be retirees," he says.
Since all three types are backed by the federal government, the investments carry the reputation of being safe and secure. And the exemption from state tax makes them attractive to retirees and people living in areas with high state income taxes.
Bankrate 2006 Savings Guide
Check out Bankrate's all-inclusive 2006 Savings Guide. Find inspiration, the best rates and more.
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Pros
Safety: Treasuries are seen as safe and secure investments. "They're backed by the federal government," says Barry Picker, partner in Picker, Weinberg & Auerbach CPAs. "If they can't pay it, we're in trouble."
Protection:Principal is protected. Unlike investments, you are guaranteed to get back your principal if you hold Treasuries until they mature.
Tax break: Interest is exempt from state taxes. That often makes them a favorite for people living in areas with high state income taxes.
Guaranteed return: The day you invest, you know when they mature and your rate of return.
Regularity: Notes and bonds pay interest every six months. So you know you'll get that regular income.
Cons
Minimum investments: Treasuries require larger amounts of cash. With T-bills, for example, you need at least $1,000.
Cons
| Type | Current | APR |
|---|---|---|
| 3 Month CD | 0.87% | 0.87% |
| 6 Month CD | 1.19% | 1.19% |
| 1 Yr CD | 1.59% | 1.60% |
| 5 Yr CD | 2.62% | 2.66% |
| 1 Yr Jumbo CD | 1.64% | 1.65% |
| MMA | 1.08% | 1.09% |
| $10K MMA | 1.15% | 1.16% |
| $25K IRA MMA | 1.40% | 1.40% |
| Jumbo IRA MMA | 1.50% | 1.51% |
| Interest Checking | 0.59% | 0.59% |
Savings Accounts Data Provided by Bankrate.com
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More: 2006 Savings Guide
| Compare Savings Products | |||||||
|---|---|---|---|---|---|---|---|
| Cost to open | Min bal. | APY* | Insured | At risk | Investment choice |
Liquidity | |
| Passbook
savings |
minimal | usually none | .25 - 5.5 | yes | no | no | complete |
| Money market acct |
$1,000 - $50,000 | yes | .15 - 5.6 | no | no | no | liberal |
| Christmas /Club acct |
minimal | usually 0 | .5 - 5.5 | yes | no | no | complete |
| MM mutual funds |
$500 - $5,000 | often | 4.5 - 5.5 | yes | no | yes | partial |
| CDs | $500 - $5,000 | usually | .10 - 5.5 | yes | no | no | with penalty |
| 529
accounts |
minimal | usually 0 | n/a ** | no | yes | yes | highly restricted |
| Savings
bonds |
approx $25 | yes | EE
bonds - 3.7 I-bonds - 2.41*** |
yes | no | no | restricted |
| Treasuries | minimum $1,000 | yes | 4.66 - 5.08 | yes | no | no | restricted |
