Chapter 4: T-bill ladders, step by step

Elaine needs $5,000 a month to run her life, and after 2022 she cannot stand watching a balance wiggle. Her $700,000 rollover has sat in cash for almost four years because every alternative felt like a coin flip. The tool built for her exact temperament is the T-bill ladder: several Treasury bills with staggered maturity dates, arranged so money keeps arriving on a schedule chosen in advance. A ladder gives every dollar a date. Prices can wobble all they like in between, because nothing ever needs selling; each rung pays its full face value on a morning printed before she committed a cent.

This chapter builds two ladders with real June 2026 auction numbers. The first is a $20,000 starter ladder anyone can copy. The second is Elaine's $60,000 spending ladder, all twelve rungs laid on the table with the interest summed honestly. Everything here runs on Chapter 3's auction mechanics, including the best part: a noncompetitive bid gets the same rate the billion-dollar buyers set, starting at $100, up to $10 million per auction.

What a ladder is

A rung is a single bill: one amount, one maturity date. A ladder is several rungs with dates in sequence, so the nearest one is always close. When it matures you face a pleasant decision. Spend the cash, or place a new bid at the far end of the line and keep the loop running. Pick the second and the ladder becomes a quiet machine that can run for years.

The hero figure catches the machine mid-stride. One rung has just matured and lifts off as spendable cash, shedding its interest on the way. Three rungs stand waiting at three-week intervals behind it. A dotted outline waits at the far right, where the matured money replants as a fresh 13-week bill at whatever rate that week's auction sets.

Two properties do the real work. The yield refreshes itself: every replanted rung picks up the current auction's rate, so the ladder follows rates up and down without you forecasting anything. And the seesaw stops mattering: Chapter 2's price swings still happen out in the market, but a bill held to maturity pays face value regardless, so the swings pass underneath you without touching the plan.

Build one with $20,000

Split $20,000 into four rungs of $5,000 and put each into a 13-week bill, staggering the purchases so one rung matures about every three weeks. At the June 8, 2026 auction, the 13-week bill's investment rate was 3.73%. Run the whole pile at that yield and the ladder pays $746 a year, because $20,000 times 3.73% is $746.

The quiet bonus hides in the tax line. Treasury interest is exempt from state and local income tax; it stays taxable federally, and IRS Topic 403 covers the paperwork. For a saver paying a 9.3% state rate, a bank would need to pay 4.11% APY to match the bill, since trimming 9.3% state tax off 4.11% lands back at about 3.73%. The bank has to pay more for you to keep the same. And because maturities sit three weeks apart, cash is never further than about 3 weeks away.

The calculator below opens at exactly this build: $20,000, the 3.73% rate from the June 8, 2026 auction, a 9.3% state rate. Swap in your own amount and your own state and watch the bank-equivalent line move.

How far from cash is laddered money?

About three weeks at the build above, and on an average day less, since some rung is always partway to its date. That is slower than a savings account and far faster than most people guess. If life demands money before any rung matures, you still have an exit: bills held at a brokerage can be sold early at the going market price, with cash arriving the next business day under the T+1 settlement rule in force since May 2024 (SEC). Selling early does reopen the price-wiggle door, which is the thing the ladder was built to close. Bills held at TreasuryDirect cannot be sold there at all; they must first be transferred to a broker, which takes time you may not have. The clean arrangement is the one Chapter 1 set up: same-week emergency money lives in the high-yield shelf, and the ladder holds money with dates.

Elaine's spending ladder, all twelve rungs

Elaine wants $5,000 landing every month for a year, which takes $60,000. The Treasury menu sells six bill terms, so six of her months line up directly: the 4-week (3.66%), 8-week (3.68%), 13-week (3.73%), 17-week (3.76%), 26-week (3.81%), and 52-week (3.91%) bills cover months 1 through 4, month 6, and month 12, all investment rates from the June 8–11, 2026 auctions. The other six months are reached with a planned roll: the rung starts in a longer bill, and at maturity the $5,000 rolls once into a short bill that lands on the target month. The interest column prices those future rolls at the same June board. That is an assumption, stated plainly, never a forecast; the real rolls will fill at whatever the future auctions pay.

Each interest figure is the principal times the rate times the fraction of a year the money is out, rounded to the nearest dollar. The $1,220 total is the interest earned by the time each rung pays out, not an annual yield; rung 1 only had four weeks to earn while rung 12 worked a full year. Every dollar in the table has a date, and every date has a dollar amount known on day one. For Elaine, that sentence is worth more than the $1,220.

Rolling forward, and the autoroll switch

When a rung matures, the cash appears in your account, and rolling it means one new noncompetitive bid for the next auction of your chosen term. The calendar cooperates: bills auction weekly for the 4, 6, 8, 13, 17, and 26-week terms, and every four weeks for the 52-week (TreasuryDirect). Missing a week is rarely a disaster, just idle cash earning a sweep rate instead of a bill rate.

You can also remove yourself from the loop. TreasuryDirect lets you schedule reinvestments when you buy, and brokerages offer the same feature under the name autoroll: the maturing bill's proceeds bid automatically into the next auction of the same term. Turn it on for rungs you intend to keep rolling, and off for rungs you plan to spend, which for Elaine's spending ladder means all twelve. A ladder with autoroll on every rung is the closest thing to a self-driving portfolio that the safe shelf sells.

What is the difference between the discount rate and the investment rate?

Auction results print two percentages for the same bill, and the smaller one confuses nearly everyone. Bills pay no coupon; you buy below face value and collect face value at maturity. The discount rate quotes that markdown against the face value on a 360-day year, an old dealer convention. The investment rate measures your gain against the money you actually handed over, on a full-year basis, which makes it comparable to an APY. At the June 8, 2026 auction, the 13-week bill's 3.73% investment rate meant paying about $4,954 today for each $5,000 of face value and collecting the full $5,000 thirteen weeks later. When you compare a bill to a savings account or a CD, use the investment rate every time. The discount rate always reads slightly lower, and quoting it will undersell your own ladder.

The state-tax edge travels well

Work the edge once and you will never skip it again. The $20,000 ladder pays $746 a year at the June 8, 2026 rate. Earn that same $746 in a bank account and a 9.3% state income tax takes about $69 of it; earn it from bills and the state takes nothing, though the federal return still wants its line either way. In California, where the top combined state rate reaches 13.3% (IRS, 2026 figures), the bank-equivalent yield climbs higher still. The edge costs no extra risk and no extra effort. Bracket details and the full three-way race against municipal bonds belong to Chapter 7 and the Finvest Tax Playbook.

When a ladder beats a fund

A ladder shines wherever money has a date: tuition due in 2029, a roof in 2027, Elaine's monthly floor. Rungs pay known dollars on known days, and the price in between is irrelevant because nothing gets sold. A bond fund shines wherever money has a job but no date, like the bond slice of a long-term portfolio: one line on a statement, automatic reinvestment, instant diversification, and a value that wiggles forever. The ETFs & Funds Guide explains the fund wrapper in its Chapter 7; Chapter 8 here stages the full rematch and shows the hybrid most people land on, with rungs for dated needs and one core fund for the rest.

Where ladders go wrong

Three wrong turns account for most ladder regret. The first is laddering the emergency fund so tightly that nothing is liquid today; an emergency does not wait three weeks, so the Chapter 1 shelf keeps the same-day money and the ladder gets the dated money. The second is forgetting the auction calendar and letting matured cash sit for weeks in a sweep account paying a fraction of the bill rate; autoroll exists for exactly this leak. The third is comparing a bill's discount rate against a bank's APY and concluding banks win; that comparison mixes two different yardsticks, and the investment rate is the honest one.

Key takeaways

• A ladder is several bills maturing in sequence. Each rung pays face value on a known date, so nothing needs selling and price wiggles pass underneath you.
• The starter build: $20,000 in four $5,000 rungs of 13-week bills at the June 8, 2026 auction's 3.73% investment rate pays $746 a year, and cash is never further than about 3 weeks away.
• Treasury interest skips state and local tax. At a 9.3% state rate, a bank would need 4.11% APY to match that 3.73% bill.
• Elaine's $60,000 spending ladder drops $5,000 every month for a year and earns an estimated $1,220 at the June 8–11, 2026 board, with the future rolls labeled as assumptions.
• Compare bills to banks using the investment rate, never the discount rate, and keep same-day emergency money out of the ladder.

Sources: TreasuryDirect: Treasury bills · TreasuryDirect: Auction results · TreasuryDirect: Tax treatment · IRS Topic 403: Interest income · Investor.gov: T+1 settlement bulletin