Making investment decisions for your retirement savings is all about balancing opportunity cost and risk. Treasury bills (T-bills) issued by the U.S. government are considered among the safest investments in the world, so risk should never be a significant deterrent. However, the return on T-bills is often quite low when compared to other types of securities; opportunity cost needs to be taken into account.

Opportunity cost is a concept in 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 unrealized returns that might be had elsewhere in the market.

A 25-year-old worker who invests in T-bills for his or her retirement is likely to earn only a fraction of what the average stock market returns would be over his or her next 40 working years. Since the worker is better able 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 worker, however, is a different story. With retirement much closer, Treasury bills offer a very real security for any funds saved up to this point. The worker has less time to recover any lost funds if he or she kept an aggressive portfolio, and the difference in returns between T-bills and equities is 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 more sense in his or her case.