To build a T-bill ladder, you pick a bill term and a number of rungs, buy one rung at each auction until every rung is funded, and then roll each maturing bill into a new bill of the same term. The Treasury auctions bills starting at a $100 minimum, so the strategy scales from small balances to large ones.1TreasuryDirect. Treasury Bills Once the ladder is running, a portion of your principal comes back at regular intervals, and each rollover captures whatever rate the next auction sets.
Pick a Term and Decide How Many Rungs
The Treasury auctions bills in seven terms: 4, 6, 8, 13, 17, 26, and 52 weeks.1TreasuryDirect. Treasury Bills The term you pick sets how often cash rotates back to you. Four rungs of 4-week bills, bought one per week for four consecutive weeks, produce a maturity every week once the cycle is running. Four rungs of 13-week bills space maturities about three weeks apart.
The number of rungs is a separate choice. More rungs mean more frequent maturities but smaller amounts each time. Fewer rungs concentrate more cash into each bill. Someone with $20,000 in a four-rung ladder puts $5,000 per rung. Someone who wants weekly access from 13-week bills would need thirteen rungs of roughly $1,540 each. Neither is wrong. It depends on whether you want larger lump sums or more frequent access.
Shorter terms keep you closer to current market rates because you roll more often. The 26-week and 52-week bills sometimes pay a slightly higher yield, though that relationship inverts when the yield curve flattens. The practical yield difference between a 4-week and a 26-week bill is usually small enough that the deciding factor should be when you actually need the cash, not chasing basis points.
Open the Account You’ll Buy Through
You can buy directly through TreasuryDirect, the Treasury’s own portal, or through a brokerage account. Buying at TreasuryDirect costs nothing: no commissions, no account fees, no transaction charges. Major brokerages generally offer auction purchases at no charge online, though a representative-assisted order may carry a small fee. Choose based on which interface you’d rather manage.
For an individual account you’ll need a Social Security Number, a U.S. bank routing and account number that accepts ACH debits and credits, a U.S. mailing address, and a valid email address.2TreasuryDirect. TreasuryDirect FAQ Trusts, corporations, partnerships, and LLCs can open entity accounts, but each has its own registration requirements and identifies an entity account manager authorized to act on the account.3eCFR. 31 CFR 363.20 – What Do I Need to Know About the Forms of Registration That Are Available for Purchases of Securities Through My TreasuryDirect Account
Buy the First Rungs on the Auction Calendar
The 4-week, 8-week, 13-week, and 26-week bills are auctioned every week. The 52-week bill is auctioned once every four weeks.4TreasuryDirect. When Auctions Happen (Schedules) For 13-week and 26-week bills, the standard cycle is a Thursday announcement, a Monday auction, and issue on the following Thursday.5TreasuryDirect. General Auction Timing Money leaves your bank account on the issue date, not the auction date, so plan your balance around the issue date.6TreasuryDirect. How Auctions Work
Building the ladder is a matter of buying one rung per cycle until every rung is active. Using the $20,000 four-rung example with 13-week bills, you submit a non-competitive bid for $5,000 at the Monday auction in week one, do the same in week two, and by the end of week four all four rungs are funded and staggered roughly a week apart.
Almost every individual investor uses a non-competitive bid. You agree to accept whatever rate the auction sets, and your bid is guaranteed to be filled. The non-competitive limit is $10 million per auction, which is not a real ceiling for personal portfolios.7eCFR. 31 CFR 356.12 – What Are the Different Types of Bids and Do They Have Specific Requirements or Restrictions Each bill costs a minimum of $100 and must be bought in $100 increments after that.1TreasuryDirect. Treasury Bills
T-bills are sold at a discount to face value: you pay slightly less than face upfront and receive the full face amount at maturity. The difference is your interest. On a $5,000 bill at a 4.5% annualized rate for 13 weeks, the discount is roughly $55, so your actual purchase price is around $4,945.
Through a brokerage the process looks similar. The fixed-income section of the platform lets you select the bill term, enter the face value, and confirm the non-competitive bid, which the brokerage then submits to the auction on your behalf.
Roll Each Rung at Maturity
Once a rung matures, you roll the principal into a new bill of the same term to keep the ladder going. TreasuryDirect lets you schedule automatic reinvestments when you place the original purchase, up to two years’ worth of rollovers depending on the term.8TreasuryDirect. Reinvesting a Treasury Marketable Security Shorter terms allow more scheduled rollovers (up to 25 for 4-week bills), longer terms fewer (a single rollover for the 52-week bill), but each cap works out to roughly two years of continuous rolling. Set a calendar reminder about a month before your last scheduled reinvestment so you can log in and schedule a new round without breaking the ladder.
At each maturity, the face value goes toward the new bill and the earned interest deposits into your linked bank account. Principal stays in the ladder, income flows to you. If rates rise between rollovers, each new rung captures the higher yield. Most brokerages offer similar automatic rollover features, though the interface varies.
To reduce the ladder by a rung or shut it down entirely, turn off reinvestment on the bills you want out. At the next maturity, the full face value lands in your bank account instead of rolling into a new purchase.
What T-Bill Interest Costs You at Tax Time
The discount you earn is interest income for federal purposes. When a bill matures, the paying agent reports the discount on Form 1099-INT, in Box 3 for interest on U.S. savings bonds and Treasury obligations.9IRS. Instructions for Forms 1099-INT and 1099-OID You’ll owe federal income tax at your ordinary rate.
T-bill interest is exempt from state and local income taxes. Under 31 U.S.C. § 3124, obligations of the United States and the interest on them are exempt from taxation by any state or local government.10Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation In a high-tax state, that exemption can meaningfully improve after-tax yield relative to bank CDs or money market funds that don’t carry it.
A running ladder produces many small interest payments across the year rather than one large one. If you make quarterly estimated payments, factor that in. The 1099-INT you receive in January aggregates all T-bill interest earned during the prior calendar year.
Getting Out or Getting Cash Early
The simplest exit is to stop reinvesting and let each rung mature. How fast you get your full balance back depends on the ladder. A four-rung, 4-week ladder unwinds in about a month. A four-rung, 26-week ladder takes roughly six months.
If you can’t wait, you can sell a T-bill on the secondary market, but TreasuryDirect doesn’t offer that directly. You’d first transfer the bill to a brokerage using FS Form 5511, which cancels any scheduled reinvestments on the transferred bill and must be done in $100 increments.11Reginfo.gov. TreasuryDirect Transfer Request (FS Form 5511) If you already hold the bills at a brokerage, you can place a sell order directly. The price depends on current rates: if rates have risen since you bought, you’ll take a small loss; if they’ve fallen, you’ll get a slight premium. Price swings on short-term bills are minor compared with longer bonds, but selling early defeats the purpose of the ladder, so treat it as an emergency valve rather than routine practice.