HYSA vs Treasury Bills (2026): State Tax Exemption, Yield, Liquidity
Quick take: T-bills (4-week to 52-week US Treasury securities) yield ~5.10-5.30% in 2026, typically 60-100 bps above top HYSAs, and are exempt from state income tax. HYSAs win on same-day liquidity; T-bills win on after-tax yield, especially in high-state-tax states (CA, NY, OR, NJ).
Savings account vs MYGA, after tax
What $100,000 earns in 5 years: savings account vs MYGA, after tax
Rates used: Savings account 4.00%, the top online savings rate we tracked (bank sites, September 24, 2026); savings rates can change any day; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Savings account, interest taxed every year | $116,604 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the savings account, after tax | $9,531 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
The side-by-side
| Feature | HYSA | Treasury Bills (T-bills) |
|---|---|---|
| Issuer | FDIC-insured bank | US Treasury (direct) |
| Credit risk | Bank failure: backstopped by FDIC to $250K | US government default: effectively zero |
| Yield (2026) (as of June 2026) | 4.10-4.55% APY | 5.10-5.30% (4-wk to 52-wk) |
| Federal tax | Ordinary income, annual | Ordinary income, at maturity |
| State tax | Fully taxable in most states | Exempt: federal Treasury exemption |
| Liquidity | Same-day via ACH | Hold to maturity (4-52 wks) or sell on secondary market |
| Minimum | $0-$5K | $100 (TreasuryDirect) or $1K (brokerage) |
| Operational complexity | Open bank account, transfer | Open TreasuryDirect or brokerage, buy at auction |
The state-tax-exemption math
For T-bills, the state tax exemption is the differentiator. In a high-state-tax state, it shifts the after-tax yield calculation materially.
$100,000 in CA (9.3% state) at 32% federal bracket
| Vehicle | Gross yield | Federal tax (32%) | State tax (9.3%) | Net yield | Net annual |
|---|---|---|---|---|---|
| HYSA @ 4.30% | 4.30% | 1.376% | 0.400% | 2.524% | $2,524 |
| 13-wk T-bill @ 5.15% | 5.15% | 1.648% | 0% | 3.502% | $3,502 |
| T-bill advantage | +85 bps | - | +state exempt | +98 bps | +$978/yr |
$100,000 in TX (0% state) at 32% federal bracket
| Vehicle | Gross yield | Federal tax (32%) | State tax (0%) | Net yield | Net annual |
|---|---|---|---|---|---|
| HYSA @ 4.30% | 4.30% | 1.376% | 0% | 2.924% | $2,924 |
| 13-wk T-bill @ 5.15% | 5.15% | 1.648% | 0% | 3.502% | $3,502 |
| T-bill advantage | +85 bps | - | Same | +58 bps | +$578/yr |
In no-state-tax states (TX, FL, WA, NV, SD, WY, AK, TN, NH), the T-bill advantage shrinks to just the gross yield difference. In high-state-tax states (CA, NY, OR, NJ, MN, HI), the exemption adds another 30-50 bps of net advantage.
Rates expire like milk.
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How to actually buy T-bills
Option 1: TreasuryDirect (direct from US Treasury)
- Free, no fees or commissions
- $100 minimum, $100 increments
- Auctions weekly (4-wk, 8-wk, 13-wk, 17-wk, 26-wk) and monthly (52-wk)
- Setup requires linking a bank account; password recovery is famously cumbersome
- UI is dated but functional
Option 2: Brokerage (Fidelity, Schwab, Vanguard)
- Free to buy at auction; small markup if buying on secondary market
- $1,000 minimum typically
- Integrated with existing brokerage account: one login
- Easier UX for laddering
- 1099-INT issued by brokerage
T-bill ladder for rolling liquidity
If you want T-bill rates with quasi-HYSA liquidity, build a ladder:
- Weekly 4-wk ladder: Buy 4-wk T-bills every Monday. One matures every Monday. Continuous rolling liquidity at 4-wk rates (~5.20% in 2026).
- Monthly 13-wk ladder: Buy 13-wk T-bills monthly. One matures monthly. Liquid + slightly higher yields than 4-wk.
- Quarterly 26-wk ladder: 4 rungs, one matures quarterly. Higher yields than shorter ladders.
When HYSA still wins
- True emergency money. T-bills require selling on secondary market for early access. HYSA is same-day. For genuinely emergency cash, HYSA simplicity matters.
- Small balances. $500 balance in HYSA is easy. T-bill min is $100 but laddering requires more thought below ~$2K.
- Operational simplicity. Some savers don't want to manage a brokerage or TreasuryDirect account. The 60-80 bps net pickup isn't worth the friction for them.
- Bill pay / debit / ATM access. T-bills don't offer any of these. HYSA does (via linked checking).
3+ year money: neither wins vs MYGA
T-bills max out at 52-wk maturity. Treasury notes/bonds extend longer, with price volatility if sold early. The curve is not inverted: on September 25, 2026 the Treasury par curve ran from 4.24% (3-month) to 5.17% (10-year) (U.S. Treasury). For 3-5 year rate-locked money, a MYGA at 5.65% beats both T-bills and HYSAs after tax:
| Vehicle | 5-yr after-tax $250K result (CA, 41.3% bracket) |
|---|---|
| HYSA @ 4.30% | $283,158 |
| 13-wk T-bill rolled (assume 5.15% avg, state exempt) | $295,400 |
| 5-yr MYGA @ 5.65% (tax-deferred) | $329,071 (net $296,415 after lump-sum tax) |
Even with the T-bill's state-tax exemption, the MYGA wins on a lump-sum-withdrawal basis, and wins by much more if the gain is spread over multiple lower-bracket retirement years.
Related research
- HYSA vs Money Market Fund, the related VMFXX / SPAXX comparison
- HYSA vs MYGA
- Best HYSA Rates 2026
- CD Reviews
My take
T-bills beat HYSAs on after-tax yield by 60-100 bps, more in high-state-tax states. The trade-off is liquidity friction (hold to maturity or sell on secondary market). For brokerage-comfortable savers in high-state-tax states, a T-bill ladder is a strict upgrade. For everyone else, HYSA simplicity has its own value. Neither is the right home for 3+ year money. That's MYGA territory.
About Hans Goldstein: Independent retirement income specialist. CA Life License #4273294. NPN #20602398. Reviews 30+ annuity carriers and the leading bank HYSAs. Hans does not earn commission on HYSAs or CDs. These reviews are written for the same risk-averse savers who often end up as MYGA buyers when they need 3+ year money. Phone: 213-414-2808. Email: hans@hansgoldstein.com.
Frequently asked questions
Run the MYGA vs HYSA math for your situation
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HYSAs are the right home for 1-12 months of cash. For 3+ year money, a MYGA typically pays 50-120 bps more and defers tax, a combo that quietly adds 15-25% to your effective yield in a high bracket. Worth 15 minutes to run your real numbers.
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Disclosure
This review is based on the carrier's public product materials and rates as of the date shown above. HYSA APYs are variable and change frequently. Confirm current values directly with the bank before opening an account. FDIC insurance covers up to $250,000 per depositor, per insured bank, per ownership category. MYGA rates referenced are illustrative top-of-market quotes as of 2026 and depend on state, carrier appointment, and product approval; not all MYGAs are available in every state. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity market; Hans is not a banking representative and does not earn compensation on HYSA or CD products. Tax discussion reflects federal law as of 2026 and is subject to change. State tax treatment varies. Always read the actual bank disclosure and consult a licensed advisor or CPA before reallocating retirement-bound funds.