Comparing taxable to tax exempt bonds, which yield to use?

[petestan]

I am retired and looking to compare what would be a better investment in my taxable account between a tax exempt bond fund vs a taxable. I know the formula is the yield/1-tax rate. What I am not sure is what yield to use. The funds show a TTM yield and a 30 day SEC yield. Depending which yield I use sometimes tax exempt makes sense, other times its taxable. Which yield is the one to use? I have to go to my taxable account to increase my bond allocation since I can't add more to my tax exempt.

Thanks

 

[USGrant1962]

The SEC yield is current, so you should use that for the analysis. But your question also points out that yields change, so keep that in mind (i.e., don't bother making changes for small differences).

 

[pb4uski]

I am retired and looking to compare what would be a better investment in my taxable account between a tax exempt bond fund vs a taxable. I know the formula is the yield/1-tax rate. What I am not sure is what yield to use. The funds show a TTM yield and a 30 day SEC yield. Depending which yield I use sometimes tax exempt makes sense, other times its taxable. Which yield is the one to use? I have to go to my taxable account to increase my bond allocation since I can't add more to my tax exempt.

Thanks

The best investment in your taxable account is international equities. Qualified dividends and LTCG are either tax-free or 15% depending on your level of taxable income.... plus, you get the foreign tx credit for any foreign taxes paid.

For example for us for 2018 with $100 as a baseline... total dividends $100, qualified dividends $74.58, non-qualified dividends $25.42.... tax on non-qualified dividends @ 12% $3.05.... foreign tax credit $7.44... net tax $4.38 tax credit... after-tax income... $104.38.

Next best is equities, particularly if you can manage you income to stay in the 0% LTCG bracket... then tax free as long as you manage it correctly or perhaps 15%.