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If you've been looking for a safe, tax-advantaged place to park cash in your Schwab account — whether as part of a retirement income plan, a temporary cash reserve, or a ladder strategy — U.S. Treasury securities deserve serious attention in today’s relatively high interest rate environment.
Treasury bills, notes, and bonds are backed by the full faith and credit of the United States government, making them effectively the safest fixed-income investment available. They offer meaningful yields in the current interest rate environment, they're exempt from state and local income taxes, and buying them through Schwab is free — no commissions, no transaction fees, no markup when purchased at auction.
The process is straightforward once you know where to look. This guide walks you through everything you need to know: the different types of Treasury securities, when and how auctions work, how to buy at auction versus the secondary market, and several practical tips for managing your holdings effectively.
Treasury securities come in several forms, each with a different maturity and structure.
Treasury bills are short-term securities that mature in one year or less. They are sold at a discount to their face value — meaning you pay less than $1,000 upfront and receive the full $1,000 at maturity. The difference between what you pay and what you receive at maturity is your interest income.
Available maturities: 4 weeks, 8 weeks, 13 weeks, 17 weeks, 26 weeks, and 52 weeks.
T-bills are the most frequently auctioned Treasury securities. The 4-week, 8-week, and 17-week bills are announced Tuesday and auctioned Wednesday or Thursday each week. The 13-week and 26-week bills are announced Thursday and auctioned the following Monday. The 52-week bill is auctioned every four weeks.
Treasury notes are medium-term securities with maturities of 2, 3, 5, 7, and 10 years. Unlike T-bills, notes pay semiannual interest (coupon payments) at a fixed rate and return the face value at maturity. 2-year and 5-year notes are typically auctioned monthly. 10-year notes are auctioned monthly, with reopenings in other months. A “reopening” is when the U.S. Treasury sells additional amounts of a previously issued security
Treasury bonds are the longest-duration Treasury securities, with maturities of 20 and 30 years. Like notes, they pay semiannual coupon interest and return face value at maturity. New 20-year and 30-year bonds are typically auctioned in February, May, August, and November, with reopenings in other months.
TIPS are a specialized type of Treasury where the principal value adjusts with inflation, as measured by the Consumer Price Index (CPI). TIPS pay a lower fixed interest rate, but because the principal increases with inflation, the actual interest paid also rises over time. TIPS are available in 5-, 10-, and 30-year maturities and are a useful tool for retirees who want inflation protection within a fixed-income allocation.
Floating Rate Notes are 2-year securities whose interest rate adjusts weekly based on the most recent 13-week T-bill discount rate. They are less commonly purchased by individual investors but are available through Schwab.
There are three primary ways to buy Treasuries: directly through TreasuryDirect.gov, through Schwab (or another brokerage), or through a mutual fund or ETF that holds Treasuries.
Navigate to schwab.com and log into your brokerage or retirement account. The process is the same regardless of account type — individual taxable, IRA, Roth IRA, trust account, or joint account.
If this is your first time accessing fixed income products on Schwab, you may be prompted to review and acknowledge a fixed income disclosure document.
From the top navigation menu, click on Trade. In the dropdown, select Bonds & Fixed Income (sometimes labeled Find Bonds & Fixed Income). This brings you to Schwab's Fixed Income Offerings page.
Alternatively, you can use the search bar at the top of the page and type 'Treasury' or 'Fixed Income' to navigate directly.
You'll see two main options: New Issues (buying at auction) and the Secondary Market (buying existing Treasuries from other investors). These work differently and each has its place.
Buying at auction through the New Issues tab allows you to pay no markup, no bid/ask spread, and no fee. You receive exactly the yield determined at the Treasury auction — the same price institutional investors generally pay.
Click on 'New Issues' in the Fixed Income section. You'll see a list of upcoming Treasury auctions showing the security type, anticipated yield, announcement date, auction date, and settlement date.
Understand the three key dates:
Timing tip: Place your order a day or two before the auction date rather than waiting until the day of the auction. Orders placed on the auction date itself may or may not be accepted depending on timing.
Filter for Treasury Auctions. In the Bond Type dropdown, select 'Treasury Auctions' to filter the list to all currently available Treasury auctions across all maturities.
Enter your order details:
Review the confirmation screen carefully, then click Submit. On the auction date, the Treasury sets the final yield and your order is filled. The security settles in your account on the settlement date.
One of the most useful features for T-bill buyers in Schwab is the Auto Roll option. When you purchase a T-bill with a maturity of 6 months or less at auction, you'll see an option to enable Auto Roll.
With Auto Roll enabled, when your T-bill matures, Schwab automatically purchases another T-bill of the same term and face value at the next available auction. You don't have to log in and reorder every time a bill matures — the cash continuously rolls over at the new prevailing rate.
This is particularly useful for investors using T-bills as a cash management tool or as part of a laddering strategy. Auto Roll can be disabled at any time if you want to take the cash instead of rolling over.
The secondary market allows you to buy Treasuries that were previously issued from other investors who are selling before maturity. This is useful when you want a specific maturity date that isn't currently being auctioned, you want a Treasury with a remaining term shorter than what's being newly issued, or you missed an auction and want to buy immediately.
From the Fixed Income Offerings page, use the search and filter tools to browse available secondary market Treasuries. You can filter by security type, maturity range, yield range, and coupon rate. Click on any Treasury to see the current ask price, yield to maturity, coupon rate, and maturity date.
Important difference from auction purchases: When you buy on the secondary market, you pay the ask price, which includes a bid/ask spread. Schwab does not charge a commission, but the spread means you may receive a slightly lower effective yield than if you'd bought at auction. For liquid, frequently traded Treasuries like the current 10-year note, this spread is typically very small.
Accrued interest: When you buy a Treasury note or bond on the secondary market between coupon payment dates, you pay accrued interest to the seller — the portion of the upcoming coupon that has accumulated since the last payment date. You get this back when the next full coupon payment arrives. This is a standard feature of bond markets and doesn't change the economics of the investment.
Secondary market orders settle faster than auction orders — typically next business day.
Interest income from U.S. Treasury securities is subject to federal income tax — reported on your 1099-INT and taxed as ordinary income. However, Treasury interest is completely exempt from state and local income taxes.
For investors in high-tax states, this exemption is significant. California has a top marginal state income tax rate of 13.3%. If you're a California resident in a high bracket, comparing the after-tax yield on a Treasury to the after-tax yield on a fully taxable option (like a money market fund that holds corporate paper) often shows the Treasury winning — even if its pre-tax yield appears lower.
Schwab will report Treasury interest on your 1099, and your CPA should recognize that Treasury interest is exempt from state taxation when preparing your state return. For IRAs and Roth IRAs, the state tax exemption is irrelevant — in retirement accounts, simply compare pre-tax yields.
One of the most popular strategies for investors using Treasuries is a ladder — purchasing multiple Treasuries with staggered maturity dates so that a portion of your holdings matures at regular intervals.
A simple T-bill ladder might involve purchasing 4-week, 8-week, 13-week, and 26-week bills simultaneously. As each bill matures, you reinvest the proceeds in a new 26-week bill. This gives you regular liquidity — you never have more than a few weeks until one of your holdings matures — while capturing higher yields available on longer-duration bills.
A note ladder works similarly. You might purchase 1-year, 2-year, 3-year, 4-year, and 5-year notes at once. As each note matures, you buy a new 5-year note. Over time, you're always holding notes across a range of maturities — capturing higher yields on longer durations while maintaining access to maturing funds each year.
The practical benefit of laddering: if interest rates rise, your maturing holdings can be reinvested at the new higher rates. If rates fall, you still have longer-duration holdings earning the previously higher rates. The ladder approach smooths out interest rate risk over time. Schwab's Auto Roll feature partially automates this for T-bills.
No. Purchasing new-issue Treasuries at auction through Schwab is completely free — no commission, no markup, no fee. For secondary market purchases, there is no commission, but the bid/ask spread effectively creates a very small cost.
The minimum purchase for any Treasury security is $1,000 face value (quantity of 1). Additional purchases must be in $1,000 increments.
Yes. Treasury securities can be purchased inside a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, or any other Schwab-held retirement account, following the same steps described above.
Yes. Treasuries held at Schwab can be sold on the secondary market before maturity. The price you receive will depend on current market interest rates — if rates have risen since you purchased, the market value of your Treasury will be below face value. If you hold to maturity, you always receive the full face value regardless of what happens to rates in the interim.
On the maturity date, the face value ($1,000 per bond) is automatically deposited into your Schwab account's cash balance. If you have Auto Roll enabled on a T-bill, a new Treasury of the same term is automatically purchased at the next auction instead.
For new-issue purchases at auction, you won't know the exact yield until after the auction closes — you're placing a non-competitive bid, meaning you accept whatever yield the auction produces. Schwab displays an expected yield range when you preview the order. For secondary market purchases, the yield to maturity is shown at the time of purchase and is locked in when you submit your order.
Yes. TIPS are purchased through the same New Issues tab, filtered by security type. They work somewhat differently — the principal adjusts with inflation, so your interest payments vary — but the purchase process at Schwab is identical.
Buying U.S. Treasuries at Schwab is one of the most straightforward and cost-effective ways to put your cash to work at rates meaningfully above what the default bank sweep pays — with the full backing of the U.S. government and a state income tax advantage for California residents.
At Arcadia Private Wealth, helping clients optimize every dollar in their portfolio — including the cash that often gets overlooked — is part of how we approach comprehensive financial planning. If you'd like to discuss how Treasuries or other fixed-income strategies might fit into your retirement income plan, we'd welcome the conversation.
Disclosure: This article is for informational purposes only and does not constitute personalized tax, legal, or investment advice. Tax and estate rules are subject to change. Please consult a qualified financial advisor, CPA, and estate planning attorney for guidance specific to your situation. Arcadia Private Wealth LLC is a Registered Investment Adviser in the state of California. Advisory services are only offered to clients or prospective clients where we are properly registered or exempt from registration.
Grant Webster, CFP®, TPCP®
Founder, Wealth Advisor