|
03-11-2012, 08:01 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,250
|
Municipal Bonds
I am planning an early retirement in 6 years when I turn 50. I've had some money on the sidelines for about three years earning almost nothing. I've been thinking of investing it in Fidelity Tax Free Bond Fund and I am looking for some feed back on this idea. I would assume that this is a relatively safe investment. Any advice/comments?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
03-11-2012, 09:07 PM
|
#2
|
Full time employment: Posting here.
Join Date: Nov 2008
Posts: 728
|
Take a look at short term, intermediate term and long term municipal bond funds. I'd also compare Fidelity with Vanguard, expenses and returns. Interest rates are low, do you know what could happen when interest rates go up?
I like municipal bonds but you can lose money when rates go up. Talk to a financial planner who charges on a hourly basis and share your goals and expectations. No one can give you a simple answer to your questions......it all depends on a number of variables. yes, municipal bonds have been great for me but so is cash, gold, ETF and index stock funds. Good Luck.
|
|
|
03-11-2012, 10:12 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,679
|
More things to consider are national versus single(home)-state tax-exempt bond funds, as the former will be tax-free on your federal tax return and at least mostly taxable on your state return, while a single(home) state bond fund will be tax-exempt on your state return, too.
Another thing to consider is what your marginal tax bracket will be when you retire. If you are in a high tax bracket, then tax-exempt funds will likely be better. But if you are in a lower tax bracket, then being in a taxable bond fund with a higher yield will be better.
I have been in muni bond funds for 22 years but when I ERed in 2008 I began reducing my muni bond fund holdings after my marginal tax bracket went down, buying more taxable bond funds instead.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
|
|
|
03-12-2012, 01:43 AM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
|
I like municipal bonds. I buy them via Edward Jones - great service, low cost.
Quote:
Originally Posted by Letj
I would assume that this is a relatively safe investment. Any advice/comments?
|
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
|
|
|
03-12-2012, 04:48 AM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 2,487
|
I like munis. Got a good bunch a few years back when they were in the dirt, and when I was figuring out my future retirement income strategy. Tax free income of over 6% on my average purchase price. Yield on current market value is less, as the market prices have strengthened. That said, I probably wouldn't be buying very many munis right now...they're mostly overpriced, IMOH. Right now, I'm more likely to pick up value stocks with a reasonable dividend.
R
__________________
Find Joy in the Journey...
|
|
|
03-12-2012, 06:12 AM
|
#6
|
Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
|
Quote:
Originally Posted by Letj
I am planning an early retirement in 6 years when I turn 50. I've had some money on the sidelines for about three years earning almost nothing. I've been thinking of investing it in Fidelity Tax Free Bond Fund and I am looking for some feed back on this idea. I would assume that this is a relatively safe investment. Any advice/comments?
|
FTABX is a good fund within it's category - according to M*, long term muni funds. Like any fund, there is some risk. In this case it has a duration of 7.4, which means it can lose 7.4% of it's principle value for each increase of 1% in LT interest rates. How it fits in your portfolio determines how safe it is. Also, how quickly you would need access to those particular funds.
|
|
|
03-12-2012, 09:02 AM
|
#7
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,250
|
Thanks to everyone. I just love the people and knowledge on this Board. To put it simply, I have a bit of money to invest and I am confused given the choices. I don't want to go too risky given the six years in which I plan to retire. I don't anticipate that I would need the money then but I could. I was thinking munis because they seem relatively safe. I also thought about dividend paying stocks but it looks like everyone is using this strategy these days.
|
|
|
03-12-2012, 03:53 PM
|
#8
|
Recycles dryer sheets
Join Date: Dec 2010
Location: Tequesta
Posts: 323
|
Read a lot of the posts here and then some books. We picked up some good munis a few years ago and they're still paying an average of a bit over 5% tax free on our actual investment. We don't care if they go down in value because we plan on keeping them to maturity, for the cash stream. My thought, right or wrong, is that if we have a bunch of them maturing at different times, if interest rates go up, we can reinvest in higher return products as the current bonds come due. If we can control our personal rate of inflation by having no debt, that seems like a good plan to me.
Right now, we've got a bunch of money hopefull coming in from a real estate sale that we need to figure out what to do with--I wish I could get some solid tax free income on it at the 4 to 5% range, but don't expect to in the immediate future.
|
|
|
03-12-2012, 05:54 PM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
|
Quote:
Originally Posted by Letj
I am planning an early retirement in 6 years when I turn 50. I've had some money on the sidelines for about three years earning almost nothing. I've been thinking of investing it in Fidelity Tax Free Bond Fund and I am looking for some feed back on this idea. I would assume that this is a relatively safe investment. Any advice/comments?
|
I think the thing you need to ask yourself (and perhaps you have) is how this fits with your overall asset allocation (AA). If fixed income is consistent with your AA AND you are in a high marginal tax bracket, then a muni-bond fund probably makes sense. With interest rates so low, I would go with a short or intermediate term fund and pay particular attention to the funds' expense ratio.
|
|
|
03-12-2012, 07:09 PM
|
#10
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,250
|
Quote:
Originally Posted by pb4uski
I think the thing you need to ask yourself (and perhaps you have) is how this fits with your overall asset allocation (AA). If fixed income is consistent with your AA AND you are in a high marginal tax bracket, then a muni-bond fund probably makes sense. With interest rates so low, I would go with a short or intermediate term fund and pay particular attention to the funds' expense ratio.
|
I have a number of write-offs that help keep my taxable income down so it's not necessarily a tax strategy for me. I am simply looking for a relatively safe 5% return.
|
|
|
03-13-2012, 07:33 AM
|
#11
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
|
If you find something with a "relatively safe 5% return" in today's environment, please let us know.
So if your marginal tax rate is low, why are you considering a muni bond fund over a corporate bond fund?
The muni fund would be preferable only where the yield exceeds the corporate bond yield * (1- you marginal tax rate). Typically where the marginal tax rate is low the corporate bonds are preferable.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|