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Are Municipal Bonds Right for You?

No one likes paying taxes. We all want to minimize the amount of taxes that we owe, so we’re always looking for any tips and tricks we can find. Municipal bonds, or munis, often seem like a great solution since they’re billed as being tax free (which we’ll talk about in a bit). Unfortunately, everyone else thinks so, too, which means that their prices reflect their tax advantages. Now, this doesn’t immediately disqualify munis as a great tool for retirement investors, but it does mean that you need to be careful about how you use them. One of the first things that you should be paying attention to if you’re thinking about munis is your asset location. By and large, because bonds are so tax inefficient, you generally really want to put them in one of your tax advantaged accounts. Bonds typically kick off a huge amount of income, and keeping them in your tax advantaged accounts – especially your tax deferred accounts – means that you don’t need to pay taxes on that income. Unfortunately, sometimes your asset allocation has more bonds than you have space in your tax advantaged accounts. This is where we start our conversation about […]

Provided by: Retirement Researcher

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