T-bills are short-term, fixed-income securities backed by the U.S. government. They are sold in minimum increments of $100 and have maturity dates ranging from four to 52 weeks.

Whether or not 澳洲幸运5官方开奖结果体彩网:Treasury bills (T-bills) make sense for your retirement portfolio depends in large part on how close you are to retirement. Making investment decisions for your retirement savings is all about balancing 澳洲幸运5官方开奖结果体彩网:opportunity cost and risk.

T-bills are issued by the U.S. government and are considered among the safest investments in the world, so risk shouldn't be a significant deterrent. However, the return on T-bills is typically quite low when compared to other types of securities, such as stocks, bonds, and 澳洲幸运5官方开奖结果体彩网:mutual funds. This is why the o💟pportunity cost needs to be taken into account.

Opportunity Cost and T-Bills Explained

Opportunity cost is a concept in 澳洲幸运5官方开奖结果体彩网:microeconomics. It states that the real cost of any decision is the next-best alternative. For example, the opportunity cost of purchasing a $500 television is not really $500 but rather the next best use of that $500, such as the returns it might have earned if it were invested.

In the case of T-bills, the opportunity cost of investing is manifested in theཧ unrealized returns that might be had elsewhere ꦑin the market.

The Treasury yield on a T-bill with a 52-week maturity is in 4.27% range as of October 2024, significantly lower than the returns of the stock market. On ꦦthe other hand,♏ the stock market has much more risk.

Balancing Opportunity Cost and Risk by Age

Investors nearing or in retirement typically allocate a large portion of their portfolio to income-producing, conservative investments to protect their nest egg. Younger investors, on the other hand, are in the accumulation phase of saving for retirement and are abl🦩e to take on 𓆏more risk.

Let's take a look at how younger and older investors might balance opportunity cost and risk as it relates to T-bills.

A 25-Year-Old Investor

A 25-year-old worker who invests in T-bills for retirement is likely to earn only a fraction of what the average stock market returns would be over the next 40 working years. Since the worker is better abꦓle to absorb fluctuations in the market over the next several decades, there is very little reason to invest in T-bills for retirement.

A 60-Year-Old Investor

A𒅌 60-year-old worker, however, is a different story. With retirement much closer, Treasury bills offer very real security for any funds saved up to this point.

Workers at this stage in life have less time to recover from losses incurred by an 澳洲幸运5官方开奖结果体彩网:aggressive portfolio in a bad market. The difference in returns between T-bills and equities is also much smaller because there is much less time for the difference to compound. This is not to say that T-bills are necessarily the worker's best bet, especially since the maturities are less than a year, but they make moꦓre sense for older investors.

The Bottom Line

Depending on your age, Treasury bills (T-bills) can be a good investment for retirement. Opportunity cost needs to be taken into account. Typically, they're more attractive to older investors than younger ones.