Money Market Fund vs. No-Penalty Certificate of Deposit (CD) vs. a 4-Month Treasury Bill Ladder: Which Wins for $20,000 in Six Months?

9 min read · Last updated October 6, 2026

On $20,000 over six months, a 4-month Treasury bill ladder paid the most in this comparison, about $422, against roughly $357 from a money market fund and $279 from a no-penalty CD, but only the money market fund lets you touch the full balance on any day without a maturity date or a bank’s withdrawal rule standing in the way.

In this article

• Money Market Funds: Full Liquidity, a Floating Yield
• No-Penalty CDs: A Locked Rate, If You Can Live With the Terms
• A 4-Month Treasury Bill Ladder: The Highest Yield, With Less Flexibility
• Money Market Fund vs. No-Penalty CD vs. Treasury Bills at a Glance
• Choose a Money Market Fund, a No-Penalty CD, or a Treasury Bill Ladder
• What Could Change This Calculus
• Frequently asked questions

A saver with $20,000 set aside for a goal six months out has three real places to put it: a money market mutual fund, a no-penalty Certificate of Deposit (CD), or a ladder of 4-month Treasury bills. All three hold safe, short-term instruments, and all three currently pay a meaningfully different rate. The choice comes down to one question: do you need the money reachable on any given day, or can you accept a fixed maturity date in exchange for a higher yield?

Money Market Funds: Full Liquidity, a Floating Yield

A money market mutual fund holds short-term, high-quality debt such as Treasury bills and repurchase agreements, and its yield resets daily as those holdings turn over. The Securities and Exchange Commission (SEC) requires funds to publish that rate as a 7-Day SEC Yield, annualizing the fund’s actual income from the trailing seven days. Vanguard’s Federal Money Market Fund (VMFXX), one of the largest funds in the category with $375.65 billion in assets, posted a 7-Day SEC Yield of 3.58% for the period ended June 30, 2026, after a 0.11% expense ratio, per Vanguard’s own fund fact sheet.

That full liquidity is the trade-off. You can add to or withdraw from a money market fund on any business day, with no lockup and no early-withdrawal penalty. Nothing locks in today’s 3.58% for six months; if short-term rates fall before your goal date, your actual yield falls with them.

$20,000 held in a money market fund paying 3.58% for six months, using 182 days as a stand-in for half a year, earns about $357 in interest: $20,000 × 3.58% × (182/365). That assumes the yield holds steady the whole time, which a floating-rate fund never promises either way.

No-Penalty CDs: A Locked Rate, If You Can Live With the Terms

A no-penalty CD locks in a fixed APY for a set term but waives the early-withdrawal penalty a standard CD charges. Ally Bank’s No Penalty CD pays 2.80% APY on an 11-month term, with no minimum deposit, and allows a full, penalty-free withdrawal any time after the first six days, per Ally’s own CD rate page, current as of October 5, 2026. The rate is fixed for the term, though it can change if the CD renews.

$20,000 in that CD for six months, withdrawn penalty-free once the goal date arrives, earns about $279 in interest at 2.80% APY, using the same 182-day basis: $20,000 × 2.80% × (182/365). That is the lowest of the three options, the price of a rate that cannot be cut mid-term the way a money market fund’s can.

A 4-Month Treasury Bill Ladder: The Highest Yield, With Less Flexibility

A Treasury bill is short-term U.S. government debt sold at a discount to its face value; the gap between the purchase price and the face value is the interest. The 17-week bill, the standard name for a 4-month bill, auctioned September 30, 2026 at a 4.230% investment rate (the annualized, bond-equivalent figure used to compare a bill to other yields) and a 4.115% discount rate, per TreasuryDirect’s own auction results. It was issued October 6, 2026 and matures February 2, 2027, 119 days later.

A true ladder for a 6-month goal means buying that 119-day bill now, then rolling the proceeds into a second short bill for the remaining roughly 63 days, rather than locking the full $20,000 into one bill whose maturity might miss the actual goal date. TreasuryDirect’s Treasury bills page explains how bills are auctioned, purchased, and redeemed.

$20,000 invested in that 119-day bill at the 4.230% investment rate earns about $276 by maturity, the difference between the discounted purchase price and the $20,000 face value received back. Reinvesting that $20,000 into a second short bill for the remaining 63 days, at a similar rate, adds roughly $146 more, for a combined total near $422 across the full six months, the highest of the three options compared here.

Unlike a money market fund, a bill is sold with a fixed maturity date, so the cash is tied up until that date unless it is sold early on the secondary market, which carries price risk. Unlike a CD, there is no early-withdrawal mechanism at all once a bill is owned directly through TreasuryDirect; selling before maturity is the only way out.

Money Market Fund vs. No-Penalty CD vs. Treasury Bills at a Glance

Factor	Money Market Fund	No-Penalty CD	4-Month Treasury Bill Ladder
Current yield	3.58% 7-Day SEC Yield (VMFXX, as of 6/30/26)	2.80% APY (Ally, as of 10/5/26)	4.230% investment rate (17-week auction, 9/30/26)
Access to your $20,000	Any business day, no lockup	Any day after the first 6 days, no penalty	Locked to the bill’s maturity date unless sold early
Rate stability	Resets daily with short-term rates	Fixed for the 11-month term	Fixed once purchased, for that bill’s term
State and local income tax	Fully taxable	Fully taxable	Exempt (federal tax still applies)
$20,000 interest over ~6 months	About $357	About $279	About $422
Best for	Savers who might need the cash on short notice	Savers who want a fixed rate protected from cuts	Savers in a high-tax state who can plan around a fixed date

Choose a Money Market Fund, a No-Penalty CD, or a Treasury Bill Ladder

Choose a money market fund if you might need some or all of the $20,000 before six months are up, or you are not certain of the exact date. Nothing locks you into a maturity date or a bank’s withdrawal rule, at the cost of a yield that can fall at any time.

Choose a no-penalty CD if a fixed rate protected from mid-term cuts matters more than squeezing out the highest possible number, and you are comfortable with one bank’s specific terms. It pays the least of the three here, but it is the simplest to set up and forget.

Choose a Treasury bill ladder if you want the highest yield of the three, you live in a state that taxes investment income, and you are willing to manage two purchases, or use a broker’s auto-roll feature, to match the bills’ maturities to your actual six-month date.

What Could Change This Calculus

A rate drop before the goal date cuts a money market fund’s yield immediately, while a CD or an already-purchased bill keeps its locked-in rate until maturity. A saver in a no-income-tax state gets nothing from the Treasury bill’s tax break, narrowing its edge over the CD. An uncertain need date favors the money market fund, since nothing has to be sold early or penalized to free up the cash.

A sudden, unplanned need for the cash still favors the no-penalty CD over the bill: the CD stays accessible at no cost, while selling an unmatured bill early can produce a gain or a loss depending on where rates have moved since purchase.

A reader still comparing the broader category of safe, short-term cash tools may find our earlier comparison of high-yield savings accounts, money market accounts, and Treasury bills useful background before choosing among these three.

Frequently asked questions

Can I lose money in a money market fund? It is rare but possible. Money market funds aim to hold a stable $1 share price and are not Federal Deposit Insurance Corporation (FDIC) insured. A fund can “break the buck” in extreme conditions, though government money market funds like VMFXX, which hold mostly Treasury securities, carry very low credit risk under normal conditions.

Is Treasury bill interest really exempt from all state income tax? Yes. Federal law exempts interest on Treasury bills, notes, and bonds from state and local income tax, and no state can override that exemption. You still owe federal income tax on the interest, so only the state and local portion of your tax bill is reduced.

What happens if I withdraw from the no-penalty CD before the first six days? Ally’s No Penalty CD only waives the early-withdrawal penalty starting the seventh day after you fund the account. Withdrawing in that first six-day window would fall outside the no-penalty terms, so plan to leave the deposit untouched for at least a week.

Do I have to use TreasuryDirect to build a Treasury bill ladder? No. Most major brokerages let you buy Treasury bills at auction or on the secondary market directly inside a regular account, often with an auto-roll feature that reinvests the proceeds into a new bill automatically, which can simplify building a ladder compared with managing it through TreasuryDirect alone.

Which of the three is federally insured? The no-penalty CD, through Ally’s FDIC coverage up to the standard limits. A money market fund is not FDIC insured, though government funds investing mainly in Treasury securities carry minimal credit risk. A Treasury bill carries the full faith and credit of the U.S. government directly, with no separate deposit insurance needed.