There is much discussion of whether investing in tax-free municipal bonds (especially if from the state you reside) is a good idea. It, of-course, depends on your income need, your tax situation and other issues. Municipal is just another name for bonds offered by states, counties and cities instead of the Federal Government or from Corporations.
Remember that bond issue for a new school or whatever that you saw on your last ballot when you voted in the last election? You could be a buyer of those municipal bonds.
Though many state budgets are under duress during this 2007-2011 period, the default rates are really quite low. Really low like .03 percent for the 30-year period ending in 2009. And in 2010, those default rates still remain well under 1%. Many states have regulations that require paying their bond debt before other expenditures (usually education gets a first seat at the table, then bond payments).
For those in high-income tax brackets, the 3.8% additional tax (in 2013) on investment income will not apply to municipal bond interest. So, this may be another enticing factor to consider municipal bonds within a diversified strategy.
This is not a recommendation to buy but rather a thought to consider if they may be appropriate for you. Discuss this with your independent Fee-Only financial planner. You have one, right?
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.