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When are Muni Funds good?
Old 03-27-2012, 05:52 PM   #1
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When are Muni Funds good?

How much do you have to have to make tax exempt municipal bond funds worthwhile?

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Old 03-27-2012, 05:58 PM   #2
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It's not how much you have [mod edit] but more your tax situation.

I would not own any muni funds or bonds until I had all my tax-advantaged accounts 100% full of bond funds AND my asset allocation still needed more bond funds AND I was in a marginal income tax bracket such that I would keep more of the monthly dividend AFTER-TAX than I would of a similar duration non-muni bond fund.


1. All tax-advantaged accounts 100% full of fixed income funds.
2. Still a need for more fixed income according to one's asset allocation.
3. Marginal income tax rate makes muni fund dividends come out ahead of taxed non-muni fund dividends.

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Old 03-28-2012, 04:15 AM   #3
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It is not about how much you have but what your marginal tax rate is. Typically, if it is at 25%, you're better off with muni bonds. If you have AMT exposure you should choose munis with no private activity exposure.
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