Can You Buy Treasury Bills Within a Roth IRA?

Holding T-bills in a Roth IRA allows your money to grow without paying current income taxes.
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Socking away some money in a Roth individual retirement account while you're young can pay big dividends when it comes time to kick back and retire. Your Roth IRA investments grow tax deferred as along as they remain in the account, and qualified withdrawals are completely free from federal income taxes. When it comes to investment options, Roths are wide open. With only a few exceptions, you can choose anything from high-risk stock funds to low-risk Treasury bills.


Treasury bills are debt obligations of the federal government. If you are looking for an ultra-safe place to park some of your retirement dollars, you've come to the right place. T-bills, like all U.S. Treasury securities, are backed by the full faith and credit of the United States government. Uncle Sam stands ready to pay both the principal and interest on your T-bill investments. It just doesn't get any safer than that.


T-bills are short-term investments with maturities of up to one year. They are issued with four-week, 13-week, 26-week and 52-week maturities, so you can choose the maturity that best suits your investment tastes. They are sold at a discount to face value in increments of $100, then mature at full face value. The difference between what you paid for the T-bill and the face value is the interest you earn. Since all of the investments held in your Roth IRA grow without creating a current income tax event, you don't report or pay taxes on the T-bill interest as you would in a regular account.

Automatic Reinvestment

Since T-bills are short-term investments, you could spend a lot of your time keeping track of when they mature, or you could just opt in to the TreasuryDirect automatic reinvestment plan. This allows the proceeds from your maturing T-bills to be automatically reinvested into additional T-bills of the same term. This process keeps your retirement money working for you and acts like compound interest on your savings account. The interest you earned on your original T-bills is now earning additional interest for you.

Custodial Account

All Roth IRA accounts are, by law, custodial or trust accounts. While the Internal Revenue Service puts few restrictions on the types of investments you can put into your Roth IRA, your custodian or trustee might impose severe investment limitations on the account. For example, if your custodian is a mutual fund company, it might limit your investments to funds under its management. If you want to put T-bills into your Roth IRA, you'll need to make sure your custodian or trustee allows such an investment.

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