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% Munis in portfolio
Old 10-01-2012, 08:12 AM   #1
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% Munis in portfolio

What % of Munis would anyone feel comfortable with , in a total retirement portfolio which is made up of 30% taxable and 70% IRA. No pension or annuity. Munis would be in taxable account to lower total Fed taxes when RMD of the IRA kicks in. I am 66 YO now. Probably Muni bond funds from Vanguard.
Thanks in advance.
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Old 10-01-2012, 08:57 AM   #2
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It probably depends on your anticipated marginal tax rate. I think I'll be able to stay within the 15% rate for awhile, so in my situation I don't think munis make much sense.
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Old 10-01-2012, 09:36 AM   #3
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My portfolio is all taxable and the current muni allocation is greater than 30%, so I don't see any problem with using the entire taxable part of your portfolio for munis.

That said, you might do better by allocating your taxable portfolio to equities that pay qualified dividends. The rate is fixed at 15% (currently), you can tax loss harvest, and you can use the IRA for taxable fixed income options, getting greater return and better diversification.
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Old 10-01-2012, 01:59 PM   #4
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My taxable account produces mainly qualified dividends now so I can stay at my 15% rate now, but at RMD time I will go higher probably. I never had Munis so that was my initial worry. Thanks, this gives me time to research the muni bond choices, etc.
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Old 10-01-2012, 03:21 PM   #5
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Quote:
Originally Posted by samclem View Post
It probably depends on your anticipated marginal tax rate. I think I'll be able to stay within the 15% rate for awhile, so in my situation I don't think munis make much sense.
+1
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Old 10-03-2012, 01:06 AM   #6
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I have about 10% in munis. I would not be comfortable with a higher % at this stage.
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Old 10-03-2012, 07:05 AM   #7
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When I ERed 4 years ago, I began draining my munis because my federal marginal tax bracket dropped from 25% to 15%. For example, I used my munios to pay most of the income taxes on the company stock I cashed out, I used my munis to do some minor rebalancing and to pay some somewhat large expenses I could not cover with my monthly cash flows. I am now at about 8% of my total portfolio with munis. It was about double that when I ERed before the draining began.
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Old 10-03-2012, 09:41 AM   #8
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Most of my piggy bank resides in tax-deferred, so no munis.
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Old 10-03-2012, 09:57 AM   #9
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Muni's are 43% of my total bond allocation. All muni's are in taxable accounts and represent about 75% of all bonds in taxable accounts. I keep as much of my bonds/bond funds (all non muni) in tax deferred accounts. Still in high tax bracket as I whittle down company stock options that are treated as income. Once that is done and tax bracket falls I will likely lighten up on % of muni's in taxable account.
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