Why You Won’t Regret Buying Treasury Bonds Yielding 5%+

Recently, I can't help but shovel more money into Treasury bonds. With 3-month-to-1-year Treasury bonds yielding 5%.4+, I feel like the guaranteed return is too high to pass up.

But the more Treasury bonds I buy, the more I wonder whether I will regret the decision a year from now. Perhaps you are starting to wonder the same thing.

Back during the 2008 global financial crisis, I ended up buying some 5-year CDs yielding 4.25%. At the time, I also thought those were fantastic rates, especially as the stock market was falling apart. However, investing in the S&P 500 would have been a much better investment.

My gut instinct tells me I won't regret buying Treasury bonds today. But let's go through the reasons why.

For background, I’ve been investing for over 27 years, worked in finance for 13 years, and retired in 2012. I started Financial Samurai in 2009 and have written over 2,500 articles.

The Risk Of Buying Risk-Free Treasury Bonds Today

Let's first go through the downsides of buying Treasury bonds with a 5%+ guaranteed return. You can buy Treasury bonds from Treasury Direct or through any online brokerage. The interest rates in the chart below are even higher now.

Treasury bond table

1) Reduced liquidity

In order to get your guaranteed Treasury bond return, you have to hold the bonds until maturity. If you don't, you may have to sell at a discount if rates stay flat or go up. The discount ultimately gets translated into having to pay more for the item you're looking to buy.

Most online brokerage accounts are automatically offering higher cash yields on uninvested cash. For example, Fidelity is offering 4.11%.

2) Missing out on potentially higher returns

The money you used to buy Treasury bonds could have been invested in other higher-performing investments. A 5% guaranteed return sounds good but is ~5% below the historical annual return of the S&P 500.

Besides using the money to invest in stocks, real estate, venture capital, and other private investments, you could also use the money to invest in your own business. Private business returns can often be much greater if things start working.

If you don't already have the appropriate net worth asset allocation in risk assets, then you may regret buying Treasury bonds, even with their current high yields.

3) Have to pay taxes

If you invest in Treasury bonds, you will receive a 1099-INT form from the Department of Treasury. You will have to pay your marginal federal income tax rate on the income. Thankfully, you will not have to pay state or local taxes on the income.

If you buy a Treasury bond at a discounted price and then sell it at a premium price, that profit will be taxable as a capital gain. Therefore, the higher your ordinary income, the higher your Treasury bond tax rate.

2023 LT ST Capital Gains Tax Rates Singles

Why I Won't Regret Buying Treasury Bonds Yielding 5%+

Now that I've discussed the main downsides of buying Treasury bonds, let me share why I'm happy to accumulate more Treasury bonds. Perhaps some of the reasons will help support your reasons as well.

1) A 5% return is higher than our safe withdrawal rate

Our safe withdrawal rate is currently 0%. It is 0% because we can live 100% off our online income. All investment income gets 100% reinvested. If you are working your safe withdrawal rate is 0% too!

If we had no online income, as retirees, our safe withdrawal rate would be between 2% – 3% to cover all our desired living expenses. Therefore, any return about 3% – 4% after taxes is enough to buy us another year of living expenses.

2) There's no upcoming big ticket item we want to buy

Although I keep on dreaming of buying a nicer house, realistically we aren't going to buy another house after buying our current one in 2020. Moving is too much of a pain.

We also aren't going to buy a new car for at least another three years. When the time comes, maybe we'll lease a new car as a company expense. With 40,500 miles on our current car, it hopefully still has many more years left to go before it becomes a money pit.

Finally, we have superfunded, and then some, both of our children's 529 plans. All other expenses can comfortably be covered through investment income or online income.

3) We're happy with what we have

Another way of saying there's nothing big we want to buy is that we're happy with what we have.

We have no desire for fancy clothes, jewelry, or watches. My watch collecting and dealing days are over.

Taking international luxury vacations is out of the cards for the next five years since our kids are still too young to appreciate or remember their trips.

We also don't have any reckless addictions like gambling, drugs, alcohol, or other vices that could set us back. I've been watching more high-stakes poker online recently and some players lose lots of money quick!

Here's a killer poker hand showing how one man lost $1 million of real money. Although the winner wins the biggest pot in live poker history, he ends up only finishing up ~$150,000 for the day.

4) Treasury bonds provide free living for most mortgage holders

80%+ of existing mortgages have rates under 5%.

A 5.5% return pays for our 2.125% primary mortgage rate and then some. Whenever you can earn a greater risk-free rate of return than your mortgage rate, you should take full advantage.

Psychologically, it feels like we are living for free every time we buy another slug of Treasury bonds. Given we continue to pay our mortgage on a monthly basis, it feels like we are double winning by paying down principal plus living for free.

Eventually, we'll pay off the mortgage. When that time comes, we will hopefully look back and marvel at how cheap homeownership really was. We'll also have a valuable asset that can either be sold or provide us with rent-free living.

Mortgages by interest rate

5) I'm in decumulation mode

Earning anything above 0% adds to our net worth. However, I decided to enter decumulation mode in 2022 at the age of 45 because I don't want to die with too much. We hit our net worth targets for our age and do not want to pay a death tax rate of 40% on remaining assets.

Hence, I don't feel it's necessary to take excess risks to earn a greater return than the risk-free rate. In fact, despite inflation, I feel blessed to be able to return 5% risk-free on our money after years of earning 1% or less.

Making 1% or less on cash felt terrible. However, making 5%+ on cash feels incredible. We have a difficult time spending all our investment income as it is.

6) We've experienced enough stress and anxiety since 2020

Life wouldn't have been too difficult if we didn't have young kids during the pandemic. But having a pandemic baby and a toddler from 2020-2022 has given us tremendous mental fatigue.

When risk assets were appreciating in value in 2020 and 2021, the pandemic was more tolerable. But then to lose all of 2021's gains in 2022 stunk. Thankfully, life also went back to normal by the second half of 2022.

I'm happy to eliminate some investment stress for the next year as we mentally recuperate. We already have plenty of risk asset exposure with our existing investments. Hence, we don't feel the need to add more exposure.

It feels great knowing that any money we save will be there plus five percent a year from now. It didn't feel good to work for free in 2022 (no net worth growth).

7) 5% Treasury bond yields won't last forever

When the Fed gets done hiking rates by the end of 2023, the clock will start ticking as to when the Fed will start lowering rates again. By end-2024, the Fed will begin to cut again. If they do, Treasury bill rates (one year during or less) will begin to decline.

Hence, my strategy is to buy as many one-year Treasury bonds as I can during the month I think the Fed will start cutting rates. This way, I'll lock in the highest risk-free return for the longest duration of time.

Buying Treasury bonds when yields are at the highest level since 2007 seems like a good bet to me. If and when yields fall, your existing bonds become more valuable.

Then as Treasury bond yields decline, so will mortgage rates. As mortgage rates decline, the demand for real estate will rebound. Hence, the key is to try to invest in real estate right before rates start declining.

With real estate prices already down between 5% – 15%, I continue to dollar-cost average into public REITs and private real estate funds like Fundrise, which outperformed in 2022. As mortgage rates decline, the demand for real estate will increase. Those with a lot of cash are taking advantage of deals right now.

historical one-year treasury bond yield chart

8) Less burden on what to do with excess cash

If you spend less than you make, you will accumulate excess cash. If you accumulate too much excess cash, it will start burning a hole in your pocket. The growing burden can be discomforting.

By parking your excess cash in short-duration Treasury bonds, you not only eliminate the discomfort, but you also earn a nominal return. With one less thing to worry about, you can spend more time doing something else more enjoyable.

Thankfully, money market rates with online brokerages have also risen so any idle cash automatically benefits.

9) A decent chance Treasury bonds will outperform stocks and real estate

The final reason why you will likely not regret buying Treasury bonds is because they could outperform stocks, real estate, and other risk assets over the next 12 months. You never know!

I'd rather benefit from higher rates than only let higher rates punish my investments.

Here's how I'd invest $250,000 now. Higher Treasury bond yields make investing in risk assets less attractive and vice versa.

Latest bond rates March 24, 2023

Owning Treasury Bonds Gives Me Peace Of Mind

Imagine if you had $20 million. At a 5% risk-free return, you would earn $1 million guaranteed. Wouldn't you take that all day long? I would.

I know most of us don't have $20 million to invest. It's just a good thought exercise to consider when deciding on where to invest.

If I felt strongly the S&P 500 or real estate had a 10% or greater upside from here, I'd buy fewer Treasury bonds. However, it's hard to see the S&P 500 break past 4,200 in 2023. Further, real estate is going through a retrenchment period that could easily last for another 6-12 months.

Therefore, I don't mind earning 5% while we get through an earnings slowdown, more Fed rate hikes, and a potential recession. I think there's a 80% chance we enter another medium recession by 2025.

If risk assets do take off, then great! My existing portfolio will benefit and my Treasury bonds will still earn a 5% return. If risk assets sell off again, then at least my Treasury bonds will outperform.

I'll be buying more stocks if the S&P 500 gets below 4,200 again. And whenever I see 10% or greater corrections in public or private real estate deals that fit my portfolio, I'll buy.

In the meantime, most of my cash is going toward Treasury bonds and my capital calls for my various private investments.

Reader Questions And Suggestions

What are some other downsides of buying Treasury bonds yielding 5% that you can think of? Do you think you'll regret buying Treasury bonds in the future? If so, why?

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Treasury Bond Invest Alternative

One of the best times to buy real estate is when mortgage rates are high and demand is low. In this scenario, you can find better deals as a buyer with better terms. When mortgage rates eventually decline, it will unleash a tremendous amount of pent-up real estate demand to boost prices.

Check out Fundrise, my favorite vertically integrated real estate manager. Fundrise offers multiple private funds that predominantly invests in residential and industrial real estate in the Sunbelt region. The Sunbelt region has lower valuations and higher net yields. The investment minimum is only $10.


In addition, one of the most interesting funds I'm allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
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  • Development Operations (DevOps)
  • Financial Technology (FinTech)
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Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. The investment minimum is also only $10, as Fundrise has democratized access to venture capital as well. Most venture capital funds have a $200,000+ minimum. 

For more nuanced personal finance content, join 65,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

160 thoughts on “Why You Won’t Regret Buying Treasury Bonds Yielding 5%+”

  1. Reuven Weizberg

    Thanks for all your hard work. I found a high yield savings account with an APY of 5.05. Would you recommend a bond over a HYSA at the same rate? Does it compound faster? Thanks.

  2. I bought maximum I-Bonds I could last year for myself and wife. Then also a multitude of laddered CDs via a bank, and now a large sum earning 4.15% at RobinHood. Not to mention the dividend payers, (sending me money to reinvest like some long lost uncle).

    I may look again at I-Bonds, or ladder in again on some 3-18 months certificates. Plus pick over the higher yielding profitable stocks.

  3. This year is the first time I’ve ever bought Treasury bonds (age 36 now).

    I have too much cash / equivalents for a variety of reasons right now and started laddering them to be able to reinvest with what I expect will be slightly higher rates soon or as better investment opportunities may come along. This gives me all the more confidence I’m making a decent decision.

    What are your thoughts on durations longer than 1 year?

  4. Hi Sam,

    What’s your opinion on short-term treasury etfs? I’m located in Canada with some USD and looking to gain exposure. I don’t believe I can buy the bonds directly. E.g. XONE



    1. The risk is principal loss if rates go higher as they have been, and you have to sell.

      Better buying today than last year. But I suspect rates will continue going up until about end May 2023. But nobody knows for sure.

  5. I wouldn’t trust the money market accounts. Ultra short term Treasury bonds are a better bet. Point being that you don’t know what is in the money market and with a possible recession on the horizon you could end up losing in a money market account. Also consider I-BONDS, currently at 6.89%, max 10K per person but still a great value.

  6. You mentioned that bonds pay a higher amount that your mortgage. Can you elaborate on this? Are you suggesting that if you have the cash to pay for your mortgage, then you should buy bonds and use the interest from bonds for your mortgage payment? Maybe I’m not understanding this statement.

    1. Yes, I’d rather buy 5%+ yielding Treasury bonds than pay down my 2.125% and 2.375% mortgages at this moment.

      You could certainly use the bond interest to pay your mortgage or do whatever you want.

  7. First time I’ve ever bought individual bonds.

    This morning in about three minutes (it took longer for the computer to boot) I bought six and twelve month treasuries on Vanguard @ ~5.2%.

    The money market there is yielding a nice 4.6% as well.

    So the treasuries lock in my rate at 60 basis points higher. I also get 50 more because I don’t have to pay CA state tax on treasuries where I do on money market (10% estimated tax rate). Total 110 basis points for three minutes work. That is the highest I have ever been paid.

    Note this is only for a portion of our investments, and I am keeping some funds in money markets to seek alpha when appropriate.

  8. Sam, I get what you have been saying about buying peace of mind via T-Bills. One thing you said that I don’t understand and would like to understand is: “1) Cash yields for online banks or brokerage accounts are currently yielding between 4.1% – 4.5%. Therefore, receiving a 5%+ Treasury yield isn’t as attractive as it might seem. You must calculate the difference between the Treasury yield and the automatic cash yield to ascertain the true benefit. Just make sure you automatically receive the cash yield and don’t have to manually buy a money market fund. Earning an extra 0.5% – 0.9%+ a year is still worth it by just clicking buttons. If you were a bank, such a Net Interest Margin is huge. Think like a bank, not like a lazy consumer.”

    Please clarify and be specific about what you meant by “make sure you automatically receive the cash yield and don’t have to manually buy a money market fund.”

  9. Morgan Adams

    I have always considered property to be my bonds. Sam, you own rental property, is it a bond? A stack? Or a percentage of both?

    80% of my net worth is commercial realestate, 12% stocks, and 8% cash. I have a small ibond position of .05%. I max out federal taxes almost every year.

    I’m 60 and will work another 3 years till I am 70% equity in the properties.

  10. What do you think of buying 5 or 10 year or 20 year treasuries?
    Seems that if inflation expectations come down and rates go down, those bonds could have substantial capital upside. What do you think?

    1. Gordon N Lefort

      I stopped reading the article when I read “risk free treasuries” How can a bond issued by a corrupt and bankrupt government be risk free?

    2. Thinkingman

      Agree, if we do have a recession or even if we don’t … when the fed cuts 10y yields will come down front the currrent 4 handle.

  11. When you say if the s&p gets below 3900 what is this number you are mentioning, where do you look for it?

  12. There is a good chance the return on your bonds won’t keep up with inflation. Russell Napier jokingly refers to financial repression as government stealing money from old people slowly. He believes they will intentionally keep inflation structurally higher than the risk-free rate of return for the next decade or so in order to bring the ratio of debt/GDP down to a more sustainable level.

  13. US defaulting on its debt is potentially another worry, isn’t? Although the possibility is extremely slim. I have been buying 3m and 6m T-bills with maturity dates up to early June (the projected default date), but I am hesitant to pull the trigger one more buying now. What are your thoughts on that?

      1. Gordon N Lefort

        You should be worried about default on any instrument issued by a bankrupt and corrupt government. Buy short term investment grade corporates instead.

    1. They’ll do a soft default via inflation. Bondholders will be paid back in dollars that have less purchasing power than the dollars they invested.

  14. Great post. I’m grappling with personal asset allocation issues given I’ve always been an “equity guy,” but fixed income yields are attractive – in nominal terms at least. I’m 42, live in an emerging market and have $2.4m of investable assets, of which ~$400k is not liquid (private equity / VC). The public portfolio is largely US stocks. My household living costs are ~$85k per annum, or 4% of the liquid portion of my portfolio. I’d ideally like to work until 50. My logic is that I can afford to be 100% allocated to equity at this point. How would you be positioned from an asset allocation perspective in this scenario?

    1. Gordon N Lefort

      I own zero long equity positions and 5% in short ETF’s like DOG and SH. Does that answer your question?

  15. Luddite Steve

    I align with the thinking here and generally feel like I need to prioritize bonds as a higher percentage of my asset allocation. I have two questions, first, given I agree rates won’t stay high forever, does it make sense to lock in rates for longer terms? Rates are a bit lower, but I’m inclined to think 4.5% for 5 years is more attractive to me right now than 5% for 12-18 months. Second, any reason not to look at cds as interchangeable with bonds? I’m still working and don’t need liquidity, so have been looking to cd rates as well as bonds.

    1. Yes, once interest-rate starts going down, all existing bonds from various generations, become more attractive / valuable. The question is the timing of the interest rate decline.

      To decide on CDs versus Treasuries, just calculate the after-tax net yield.

      1. Gordon N Lefort

        Interest rates on bonds are NOT going down and equities are NOT going up -for a long – long time.

  16. Sam, Love your content! Can you write an article on Muni bonds? What are some recommendations for top quality Muni bonds and how to buy them? .Are they generating over 6% returns now?

  17. I agree with most of this post. But is there any particular reason for focusing on buying individual bonds, rather than on buying shares in a bond mutual fund or ETF?

    One difference of course is that if you hold an individual bond to maturity, it pays exactly what you expect it to. But with a bond fund, the share price can go up or down on a daily basis (usually in the opposite direction of interest rates). So maybe that difference is where you’re coming from — though that difference isn’t necessarily an advantage for one side or the other. It depends on what your priorities are, and on which direction interest rates move in the future.

    I would rather invest in a short-term bond fund because it’s more liquid, and because I think interest rates are more likely to stay the same or go down over the next year or two than to go up significantly. But I also realize that I could be wrong and could get burned if rates continue to go up at a rapid pace.

    1. There are no liquidity issues with US Treasury bonds. Other types of bonds that liquidity can be a fair concern but not with US Treasuries (especially short term ones).

      1. Gordon N Lefort

        Buy short term investment grade corporates rather that bonds issued by a corrupt and bankrupt government.

  18. I don’t plan to buy Treasury bonds this year. I think it’s better to buy stocks while it’s down.
    We aren’t in decumulation mode yet. Maybe in a few years, I’d feel better about buying more bonds.

    1. I’m doing both – stocks are trading at ~19x forward earnings (assuming forward earnings don’t come down further), which is ~3x above historical average, so hard to argue stocks are cheap here. My retirement account $ is largely going all bonds but non-retirement money is going largely to short term Treasuries (15 months or less) and may start nibbling on medium term ones this summer

    2. Joe, do you think if your wife wasn’t working and bringing a high income, you would still invest all in stocks?

      In such a situation, you become a true retiree, not a stay at home spouse with a working spouse.

      Your risk profile is different.

      1. I can’t speak for Joe but I am retired and my wife still works. We have kept good records of our expenses and have a pretty good handle on how much we will need when she joins me in retirement and her active income/benefits go away. With that in mind, we have created enough passive income streams to cover our projected expenses when we are both in retirement and are able to keep the majority of our investment portfolio growing in risk assets.

        My advice would be that you invest based on your projected needs and any gaps should be covered by other, less risky sources that are not in your equity portfolio.

  19. I remember when I was a teenager in the mid-80s I was getting 12% on a money market fund my dad bought for me. Take that!

      1. Being a teenager, I probably spent the money on stupid things….a bike, moped and all those Duran Duran wanna be clothes. At 55 now, I am doing just fine with my financial situation and teaching my 20 year old daughter not to do what I did.

  20. For someone living in Washington state (has no state tax), would you recommend buying Treasury or CD?

  21. It’s the safe withdrawal rate supposed to be inflation adjusted? So 5% return isn’t necessarily higher than a safe withdrawal rate.

  22. I feel similarly, Sam. I’m amazed by these treasury rates. I’m very used to hearing (and agreeing) with the “stocks for the long run” logic, so it’s weird to see myself preferring treasury bills right now.

    I’m early in my financial journey. My total financial assets sum up to just about my remaining mortgage balance (rate of 2.625%, fixed for 30 years!). If I held my entire NW in these bills, I would basically have no net-debt on my personal balance sheet. To top it off, I would be carrying a 2+% riskless positive spread (most of my assets are in IRAs, so no tax friction), and I’d have FREE optionality to invest in future opportunities as they arise. Given this, it’s hard for me to get excited about equities; their risk premium doesn’t seem to be that big right now based on valuation.

    To those who are worried about the US defaulting, you need to think about how your equities would do in this scenario… Do you think the cash on the balance sheet of your favorite stocks is sitting in paper bills in a vault? It’s not, it’s likely in t-bills. Their credit lines at bank? Look at what those banks use for T1 capital to stay solvent. If we default on our debt, it will be simply due to reckless politicians playing chicken.

    1. Gordon N Lefort

      Stocks for the “long run” no longer applies when the economy is set to collapse from debt.

    2. Gordon N Lefort

      What about when we can’t pay the interest on government debt – what is that called?

  23. VMRXX at Vanguard 30-day yield 4.52% right now (0.1% expense ration, no other fees). Completely liquid. Anyone keeping extra cash or emergency cash in a bank checking or savings account is literally throwing money away.

    1. Wonderful to hear! And what Vanguard probably does is pay 4.52% and reinvests customer cash into a bond that yields more to make the spread. Classic banking, and low risk.

      So I encourage investors to just take the next steps and earn the highest yield on their cash. Why not. 0.5% is free money.

      1. And it’s greater than 0.5% on an after tax basis.

        Also your treasuries are completely liquid. You can sell. Sure, if rates go up maybe at a slight loss, but if you’re doing 6 – 12 months, the loss will be negligible.

        But I’m also for the people who say it just isn’t worth the hassle. If you were to take $1m, that’s $45k in the standard money mkt / cash account, or $27k after a 40% marginal tax rate (federal + state). In treasuries, that’s $50k, or $35k after a 30% marginal federal rate (no state). If you’re doing this with $1m (meaning you probably have >$5m liquid), I understand it not being worth the hassle over $8k after taxes

        1. If that’s all of your income for a married couple retired early, your tax rate for federal on $50k is actually closer to 4% (first 27k is free, next 22k at 10%, then 12%). In fact, to get to 30% federal marginal rate you’d need to make around $400k for one dollar to be above 24% federal – which is only about 1.5% of filers. State taxes for most folks will be in the 4-7% range rather than 10%. Reduce those #s in half for single person but still people really overestimated their taxes in general. I am in the 32%, 35%+ range every year (at least until I retire) but most folks are not (median household income is about $80k today)

  24. My two cents:

    You’re in your 40s with potentially 50+ years of compounding ahead of you.

    In terms of what you already have (including the revenue from this site), you’ve won the game so to speak so you don’t have the NEED to take risk.

    However, that means with any new investable money coming in you have the ABILITY to take risk and let it ride for 50+ years of compounding.

    Why wouldn’t you do that? Sure, you and your wife may not need it, and your kids may not need it either (or you may not desire to give it to them), but why not invest the money in stock index funds for causes/charities/etc. that you believe in? Why not use your ability to take risk with this money to make lasting change for some cause/causes/charities you believe in through what will (if history is any guide) be massive compounding over 40 years?

    I guess I just don’t see it. To me, you protect conservatively what “wins the game” for you. But after that? I’m investing to better the planet and humanity for the charities/causes I believe in.

    1. Thanks for sharing your thoughts.

      “but why not invest the money in stock index funds for causes/charities/etc. that you believe in? Why not use your ability to take risk with this money to make lasting change for some cause/causes/charities you believe in through what will (if history is any guide) be massive compounding over 40 years?”

      I do. You’re reading about what I’m doing with my current cash flow. It is a small slice of my overall investments/net worth.

      Please share some of the things you are doing to better the planet and humanity.

      How much money do you think is enough to be happy? And where are you on your financial journey?

      1. I’m also curious know what net worth range Chadnudj is in.

        After I passed about $3 million in investable assets, I diversified more and derisked.

        I currently have $8 million in investable assets.

  25. This was very informative read, thank you. Your thinking mirrors my thinking. I manage my mom’s account. I’m consolidating her retirement accounts into fidelity and just buying treasuries, CDs and index fund (20%).

    Even if she misses out a point or two to inflation, rates like this can’t be passed up.

  26. Wait.
    You earn 5% taxable interest when inflation is running 6-8%
    Your are losing real spending power and it’s not sustainable.
    100% Stock market it is.

    1. I completely agree with you Joe! 3% (could be a little higher) safe withdrawal rate, remaining 97% in an stock index fund. I argue that 3% annual withdrawal (only .25% monthly!) essentially means everything is “long term”. Some months or years you’ll loose a little due to volatility, but you’re just as likely to gain as loose. If watching it gives you heartburn then don’t watch it.

      “Everyone has the brain power to make money in stocks. Not everyone has the stomach.” – Peter Lynch

      1. Adrian, how much do you have in stocks?

        All in in stocks is pretty easy if you have less than $3 million in stocks. But I think once you have over $3 million, you tend to want to spread it around more.

        Maybe that’s me. FYI, my investable assets are at about $8 million now and I’m also retired.

      1. I retired in 2019 so my S&P returns are roughly:

        2023 4.20%
        2022 -18.11%
        2021 28.71%
        2020 18.40%
        2019 31.49%

        I’ll gladly take the 20% hit in 2022. You may think you can time the market. I do not.

        Want to go back further? slickcharts.com/sp500/returns

        1. Wonderful. Are you retired as well or still working? How old are you?

          I’ve found I got more conservative once I retired and had kids.

          Also, what percentage of your net worth is in public equities? I’ve also throttled my exposure too.

          I can’t time the market well either.

          1. Fully retired at 47, I’ll be 51 this month. Essentially everything is equities. If 1) everything is long term, as I said I believe above and 2) stocks have outperformed bonds and precious metals over the last 90+ years…why not put everything there? I understand it’ll give anyone heartburn that’s looking at it regularly, but it’s a fairly safe, objective and calculated risk. IMHO, if you’re in it for the long haul, equities are it.

            1. Good stuff. I was in it for the long haul until I reached my target net worth amounts. Now I don’t feel the need to take excess risk. In the long run, we’ll be dead, so I’m more focused on capital preservation and spending down my money.

              How much net worth is enough? Once you reached your target, what propels you to want more? It’s something I went through at age 34-45. But now that I’m way past my targets, I just find the need to make more unnecessary.

              1. I don’t see it as taking excess risk. Because you’ve reached your goal, what you are calling “risk” and what I call “volatility” become less relevant. If you won the lottery today (say $100 million net after taxes), I argue that because you’re now well passed your goal the fluctuations up and down in an all equity portfolio is nothing but noise. It doesn’t matter if the market goes down 50-60-70%. Unlikely IMHO, but you’ll still be well above your goal, and give it time your portfolio will recover.

                Why keep accumulating? Philanthropy. Bill Gates & Warren Buffet… I’d bet they’re still investing as they always have despite having far more than they need. I’ll start an education fund for my children, grand children, and those outside the family less fortunate. I feel an obligation to them to invest as wisely as possible.

                Why do you feel an obligation to spend down your money? Wouldn’t you rather give it towards a cause of your choice rather than just “spend it down”? There are plenty of people who need help. I will admit that helping someone is much easier said than done.

                1. I do. Spending down money includes giving it away.

                  What are some things you’re spending your money on and how much net worth is enough for you?

                  My theory is that after a certain level, views on accumulating more and taking risk change so I’d love to know your level.

                  Could be a great post!

    2. 1) Depends on age, net worth and time horizon. If you young and not retiring for 20-40 years, I agree. If you are in retirement, steady cash is very valuable – if stocks drop 25% and you have inflation of 6-8%, you just lost 1/3 of your net worth in one year vs 1-3% if you went all bonds. So again time horizon is very important.

      2) Inflation is not expected to be 6-8% over the next year (especially once you adjust for OER inflating it now – was deflating it a year ago) – Its expected to be around 4-6% in 2023.

      3) Stocks are trading at 19x Forward earnings, which is 3x premium to long term average. They are not cheap or a bargain here, especially with interest expense likely to rise over the next few years as company refinance debt at higher rates.

      I am investing in both – along with real estate and a bit of physical silver & gold – too many unknowns here to put all your eggs in one basket IMO.

  27. Depending on how much you want to invest and time horizon, I like doing an equal amount in 3, 6, 9, 12, 18 and 24 month treasuries right now. When the 3 month matures, go out 18 months and just keep rolling that way +- depending on how the bond yields go. 7 year at 4.1% is tempting for a bit of it as well.

    1. Yes. Not a bad idea. The biggest “risk” is waiting for the initial Treasury bond purchase to mature. After that, you’re just rolling in liquidity if you do a bond ladder.

  28. Dear Sam:
    It is Tuesday afternoon, Feb. 21, 2023. I have been a public accountant for the last fifty years. May I disagree with you in one area? In several of your articles, you state that you
    are in a “decumulation mode”. First, you have every right to do with your money as you see fit. In my fifty years of experience, the decumulation mode or spending down your financial net worth is a terrible idea. I could write a two hundred page book of reasons why people should not spend down their financial net worth. All of these reasons are never taught in school. Nobody has ever written a book about this subject. It is OK if you disagree with me. Sincerely, Richard.

      1. Agree with accountant. Hopefully you have revocable trust set up for kids. I believe that 12.82 million is tax exempt. I believe once we have reached land of critical mass to be conservative and not lose money but keep growing net worth. I’ve always invested conservatively but still can grow net worth every year.

        1. I think Sam’s point is it depends on what your goal is. Is the idea to generate a bunch of wealth to give to your kids, or to enjoy it? The point of decumulation is a state of mind in which Sam is saying I made all this money to enjoy my life, let me go do that

        2. Dunning freaking kruger

          Federal estate tax is 12.92 mm for a single person. 25.84 mm for a married couples estate.

          That is a lot of clams. I suppose at those levels you will choose the state you live in wisely.

          And at those levels 5% in treasuries, especially in a tax shelter, would be safe and lucrative.

          5% in a tax shelter in the 32% bracket is roughly equal to a 7.35 % return risk free in a post tax account. Sign me up!

      2. Dear Sam,

        If you are excited about treasuries wouldn’t the natural progression be muni bonds? What are your thoughts on munis? Might make for a great post! Pros and cons vs treasuries, credit spreads, ease of buying treasuries vs building a portfolio of munis, haircut on buying or selling a muni. Historically, munis have been a very popular choice for high earners, with large assets, in high tax states.

  29. If this is emergency fund money that you would not be investing in risky assets anyhow, this is a no-brainer decision. I’ve been doing the same and stashing cash that I will need to use for college tuition over the next 2-3 years. Maybe I will lose some opportunity cost, but I need the guaranteed return on this money and 5% is icing on the cake.

  30. Simple Money Man

    I’m wondering if Treasuries are good if you’re in the capital preservation and income generation stage.

    But for the growth and accumulation stage – 15+ year time horizon I’d rather get more bang for my buck (downside of tolerating market volatility) for now with a growth ETF or index fund.


  31. What would happen to our T-bills if US defaults on their debt? (Not raise the debt ceiling)

    I’m hesitant to buy any long-term T-bills because of this.

      1. Andy Scoggins

        I have this exact problem too. My approach is to try to not have any bills that mature around or after the time the government is expected to default should the statemate not be resolved (June or July). Problem is, I already have some that are maturing close to that, but those that have already matured I’m trying to shoehorn them (for example) into 4 or 8 weeks bills. The only problem is waiting until an issue date during which time I’m not earning any interest. When it gets closer if the stalemate is still unresolved I don’t know *what* I will do. Pull my hair out more probably? Move it back into my high yield savings account and give up a percent or two maybe?

    1. There is zero chance we default on the debt unless Biden purposely does so. The amount collected is 9x the interest expense. Our debt has higher priority than other spending, which is what would be cut.

      That said, extremely unlikely anything real happens. Will be a very meager “cut” (aka a small cut in the rate of growth) and they’ll raise the limit.

  32. tax-free yield seeker

    Hi Sam,
    For those of us with high incomes in high tax states such as California, don’t muni bonds or bond funds make more sense than treasuries?

    1. Muni bond funds are tax-free at the federal level, but still taxed at the state level. Unless you are specifically buying a California muni bond fund.

  33. I like the liquidity of money market liquidity, but with brokerage accounts it’s important to have the right settlement fund that doesn’t have redemption gates. If markets do become super volatile, there are money market funds that be temporarily frozen.

    I’ve recently been looking at MBS, primarily because of Fed balance sheet, and apparently that market is very screwed up, with an result prediction that mortgage rates will continue drifting higher for a long time.

    Higher mortgage rates, higher inflation and the likelihood equities will decline creates a confusing environment, where opportunities will be limited. I’m also thinking thr housing market will be weird, freezing up, but not crashing. Seems like Fed will have to push rates far more aggressively, because inflation is trending higher. It’s kind of bleak ahead and being in treasury stuff is a no brained.

  34. Florida Alex


    With the 4.2% yield on the Fidelity Government Money Market (core cash position of all my fidelity brokerage and retirement accounts) that delivers monthly payouts, I have a hard time justifying the illiquidity for that yield spread between treasuries & money markets.

    I do like the idea of buying some treasuries and/or CDs and locking in longer term yields when we think rates are peaking.

    1. True, the cash yields are high nowadays. And they are no doubt great!

      But 5% is 19% higher than 4.2%. Once you start getting your treasury buying rolling, you’ll find liquidity to be fast and furious as your bonds mature.

      I just looked at my Fidelity account just now, and it said I have $73,000 to invest when I thought there was less than $1,000. Another short term treasury bond came due.

      1. Schwab Value Advantage money market pays 4.48 percent SWVXX and keeps going up every time feds raise rates. Not bad. I have question why would the S&P go any higher than 3400 which was in Feb 2020 high before all the fed liquidity or even lower when all sad and done. Also what to do with 1 year treasury money when they mature and rates much lower with risk free money.

  35. I have been purchasing 4-week T-Bills since December. My wife is pretty conservative with cash so having funds tied up for 4-week stretches are tolerable for her. We started with $10k purchases every week for 4-weeks and have bumped that up to $20k purchases. Our house is paid off and she received a very generous bonus this year; it’s too hard to shy away from these rates at the moment.

    1. Sounds good. And in four weeks, you will have cash coming to do every single week that is when you feel like you can buy slightly longer duration bonds for higher yields.

  36. Hi Sam,

    Longtime reader and I am huge on guaranteed returns. You should look into Capital One bank (I’m a firefighter and have no affiliation with them.)

    I have been using them for 7 years and they always have the best rates. Savings account is paying 3.3% and their 11 month CD is paying 5%.

    Just something to look into. Thanks for all the years of great information!

  37. Good idea. But for me, my arm loan, which had been at 3 and 2.65, is now going to 5%. So I’m going to pay some down, to bring it to a similar monthly payment as I had before. Before. I also had a lot of money and worthy bonds, paying straight 5%, Ialbeir with some risk. I’m going to have a lot of cash in the next couple weeks because my first stock vests with my employer of 3 years, and they have done very well.

  38. Hi Sam!

    Thank you for another amazing read! Your work has drastically improved my finances since I started following you in 2017.

    A quick question for you:

    Are treasuries more appealing to you than municipal bond funds/ETFs? I use Vanguard so the one I am currently utilizing is VTEB. However, the Fidelity equivalent (from what I can see) is FMBIX.

    When looking at the different holdings, the majority of these are paying 5% at the moment. The big difference is with the muni bonds, it’s federal taxes that are exempt (yet you still pay state and local). Even though California is by far the highest state regarding income tax, I would think being exempt from federal taxes would still be a sweeter deal.

    What am I missing? Is it just the ‘locked-in’ rate aspect that you mentioned? With these ETFs, it definitely is liquid, but there is constant turnover within them to the point that they seem to be maximizing what bonds they hold. I’m just wondering if forgoing that ‘locked-in’ rate versus cutting down on federal taxes could be the ideal situation for myself and others (South Carolina state income tax = 7%). There is an expense ratio for these, but they’re small (FMBIX is 0.07% and VTEB is 0.05%.



    1. Hi Josh, it depends on the yields for sure. But it also depends on whether you were trying to earn capital gains, mostly or earn income.

      When you buy bond funds, the NAVs move on a daily basis. It’s not a bad idea with rates going higher, and eventually plateauing and declining. But you run the risk of losing capital if not.

      I’m mostly just buying Treasury bonds and holding them to maturity. Mentally, it feels great.

      To me, feeling stressed about holding bonds, is counterproductive to why you would want to buy bonds.

      1. Sam,

        Excellent! Thank you for responding to so many of our inquiries! That’s why you have so many ‘lifers’ following Financial Samurai. You’ve built something special!


    1. Not yet. Did you end up shorting the S&P 500 in Oct 2022 in anticipation? If not, how did you invest?

      Your comment in December 2022

      “ We’re only one major unexpected world event away from the markets reverting to mean. S&P 500 below 3000 in 2023.”

      1. No I have not shorted the S&P but I have been out of equities for nearly a year now.
        As for an unexpected world event, the next few weeks look as good as any for one to occur.

          1. In general, it’s easier to say something than to actually do something.

            Talk is cheap as the saying goes. If one doesn’t take action on one’s beliefs, one really doesn’t have strong beliefs.

            The wealthiest people I know take action. They lose big but also win big.

            I have a feeling Joe M is not wealthy. But maybe he can shine some light.

            1. I thought completely selling my equity positions was taking a pretty drastic action on my beliefs? Maybe not. In any case, I’m pretty wealthy Derek. Thanks for asking.

            2. Andy Scoggins

              Yeah the possibility of losing big is an unacceptable risk if you aren’t wealthy enough. If you are, you can tolerate losses, but until you reach a certain level they can wipe you out or set you back so far you wish you had never took the risk in the first place, even if the EV was hugely positive.

    1. Not in my taxable account. I like to rebalance by adding more funds to my portfolio. But I don’t know your portfolio’s composition or your finances. I’d talk to a financial advisor.

          1. Andy Scoggins

            cash flow would be a good one too. income doesn’t mean a thing if your obligations exceed that.

    1. It is to me because I continue to have excess cash, as most do who spend less than they earn. There might come a time when the money market fund’s rate might decline over a 12-month period versus locking in something higher in a one-year Treasury bond.

      But 4.51! is certainly excellent!

  39. Sumonto Ghosh

    Thanks for the great articles, I have ur book and have been reading ur articles for a couple of years now

    What is your take on whole life insurance for kids vs 529, I do the former for various reasons


      1. I bought a small whole life policy from a mutual insurance for each kid which will be “paid up” at age 40. The cash value builds up nicely over time which by age 40 will be a nice emergency reserve for them. Also, if that mutual company demutualizes then as a bonus, we could receive some shares due to IPO.

  40. Manuel Campbell

    I’m using a similar strategy.

    Personally, I’m not as optimistic as you are about inflation. And I’m not as enthousiastic about the 5% rate. I have a feeling inflation will be stickier than we think and that rates will be higher as the new normal. So, I have been careful in my purchases. But I will continue to buy more as interest rate move higher.

    Earnings have been good in general for Q4 2022. Maybe not so much so in “real” term. But they look great in “nominal” term.

    For example, take Coca-Cola. Volume were down -1% in the last reported quarter. But revenues were up +7% due to inflation. However, gross margin was up only +4% because costs also increased but by +10%.

    If companies can grow their revenues at a 7%, even without selling more, the 5% yield on treasuries look less attractive. That’s great, particularly if we want to park some cash for some time. But I’m not going all-in on treasury bonds right now …

  41. I’ve been pretty satisfied with leaving my excess cash in my brokerage settlement (money market) fund. It’s currently earning 4.6%, has a stable (risk-free) $1 price, and is ready to immediately use when opportunities arise like you described (s&p drops to 3900, or the fed is getting close to a rate cut next year). And if the Fed Rate continues to go up the next few months, the yield should closely follow. I can’t see the reason to take on the rate risk of a 1 year Treasury in the meantime, since I’m getting a very comparable rate already. Is there an aspect I’m not thinking of, or something I’m leaving on the table?

    1. Is your cash in your brokerage account automatically getting 4.6%? If so, that’s great.

      I’d still buy 3-month Treasury bills every month for ~4.9% and just keep rolling them into new 3-month Treasury bills given the yield is higher. After 3 months, you’re getting monthly hits of liquidity. Same thing in 6 months, 9 months, and 1 year. It’s just the initial wait which is the risk.. but if you’re making money, I see little liquidity risk.

          1. Thank you for the response Sam, I signed up for your letter. The 6.8 is only good for six months and if the reset rate is zero in May then Ibonds will only truly give half the 6.8 percent. DO you have a prediction for the next Ibond rate in May?

  42. What if you dropped half an emergency fund in Treasury Bonds? Seems like an easy way to get some interest on what would otherwise just be cash.

  43. You say that you will load up on 1-year treasuries when interest rates peak in order lock in the highest return for the longest period of time. I think you are mistaken in this. Yes, with an inverted yield curve, you may get the highest interest rate – but for only 1 year. So maybe you get 5 to 5.5 percent total return. If instead you load up on long-term treasuries …. 10, 20, 30 years… You will get less of a yield, but as rates come down, you could reap sizable capital gains if you sell when rates are lower. If for example, the duration is 10 or 15, you could make 10 or 15 % in capital gains (if interest rates came down 1%) plus whatever your bond yield is (maybe 4% instead of 5). So a total return of maybe 14-19% instead of 5. Of course, this is a much riskier strategy because if you are wrong and rates go UP instead of down, you would be screwed. So your idea is much safer, but if you are betting on lower rates, then buying 1 year treasuries is not the way to do it IMHO.

    1. Sounds good to me. You can buy Treasuries for capital appreciation or for income. Feel free to do what you want. I’ve got plenty of risk exposure already.

      What are you doing with your money? And where are you on your financial journey? Getting some background is helpful.

  44. Sam how is interest paid on the short term treasuries that have no coupon? Are you essentially buying the bond at a discount equal to 5% annually? Then do you still receive a 1099 Int or is it a capital gain?

    1. Yes, buying a T-bill you buy the bill at a discount and are paid out the full bill amount at maturity. It is easy to buy them on Treasury Direct or at the major brokerages with no commission if you have an IRA etc. and you want to get some bond exposure in your retirement accounts.

  45. I’m torn between investing in treasuries or a money market account with a good interest rate. With the vanguard federal money market, I have liquid cash, earning close to what the treasuries are earning. The downside of the money market is the rate will definitely fluctuate. Sam, which would you pick or would you just do half and half?

  46. Sam, correct me if I’m wrong; in order for the T-bond to “pay” for your mortgage at 2.125%, don’t you have to buy enough bonds as you have in mortgage principal? For example, if you have a $500k mortgage, don’t you have to buy $500k worth of bonds to “pay” for the mortgage? If that’s the case, I would definitely invest elsewhere and assume a bigger risk for bigger reward.

    1. Correct. Or perhaps closer to $250K in bonds in this case since the yield is 5%.

      It’s temporary. But it’s good to pounce on temporary anomalies.

      Even if you don’t buy enough Treasury bonds to live for free, every $1,000 in bonds you do purchase moves you towards living for free. It’s a psychological and financial win.

      1. hi Sam,
        1.What 2 year bond on fidelity would you purchase?
        2. And Not FINancial advice but: For over 60 year old, that is on conservative side, what % hold in cash and % hold in bonds in a portfolio?

  47. I used to love CDs until rates collapsed and I only started investing in Treasuries this year. I didn’t realize how easy it is with platforms like Fidelity. I’ve also been legging into more treasuries this week and plan to continue here and there for the remainder of the year. I’m still putting some money into ETFs like IVV on big down days, but I’m a huge fan of the 5% guaranteed treasury returns!

    1. I bonds have also been fantastic. I started buying with the 7% yield. Treasury Direct is an old website, but also great in my opinion. The hardest part of Treasury Direct is setting up the account. After setting the account it is the simplest process to buy T-bills, I bonds etc directly from the government. The brokerage route is easy too, but I actually like the government site better because it gives more options for viewing the bonds and creating bond ladders and such.

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