80/10/10 Muni/Treasury/CD split for income. Should I change things?

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CocoCaiman
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Joined: Fri May 11, 2018 2:48 pm

80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by CocoCaiman » Fri May 11, 2018 3:14 pm

I have 80% Non-taxable Investment Grade Individual Municipal Bonds, 10% Treasuries, and 10% CDs. I have no debts, no big expenses, and a large cushion in the bank. I am using the Munis just for income and I will reinvest the leftover income in the same items. I don't pay much in taxes and I can purchase non-taxable Muni bonds from any state without being taxed. I came into these investments so they were not made by me. All I want to do is keep getting the 3-5% returns every year and not lose everything or get overly taxed. Should I aim for something more diversified or am I in a good spot? Thank you :)

Lou354
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Re: 80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by Lou354 » Fri May 11, 2018 3:47 pm

If you’re in a low marginal tax bracket municipal bonds may not be a good deal for you. Do a search for ‘tax equivalent yield.’

dbr
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Re: 80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by dbr » Fri May 11, 2018 4:09 pm

In general holding an investment "for income" doesn't make any sense. A better approach would be to look at your overall financial situation and decide what to do with these assets as part of a plan. That is the only way to answer about diversity and what kind of spot you are in. Taxes are part of the analysis. If your income is so low that buying munis from any state still does not generate a tax cost, then usually munis are not what you would want to be invested in.

This sticky suggests how to formulate the overall plan: viewtopic.php?f=1&t=6212

Sidney
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Re: 80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by Sidney » Fri May 11, 2018 4:18 pm

3% is probably the ceiling for that asset mix. 5% is not realistic. And those are nominal rates. Average real rate for that mix is probably close to zero.
I always wanted to be a procrastinator.

CocoCaiman
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Re: 80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by CocoCaiman » Fri May 11, 2018 8:45 pm

dbr wrote:
Fri May 11, 2018 4:09 pm
In general holding an investment "for income" doesn't make any sense. A better approach would be to look at your overall financial situation and decide what to do with these assets as part of a plan. That is the only way to answer about diversity and what kind of spot you are in. Taxes are part of the analysis. If your income is so low that buying munis from any state still does not generate a tax cost, then usually munis are not what you would want to be invested in.

This sticky suggests how to formulate the overall plan: viewtopic.php?f=1&t=6212
Well, I'm making more than enough income from the muni bonds to not have to work which is important to me. Also, I live in a state that doesn't have a state income tax so I can buy non-taxable muni bonds from any state without being taxed. My bonds have 3-5% yields. I am not sure if it would be wise to move a portion into something else. Thanks I will do more reading.

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whodidntante
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Re: 80/10/10 Muni/Treasury/CD split for income. Should I change things?

Post by whodidntante » Sat May 12, 2018 12:25 am

I see you're new here, so welcome. Investing for total return in a tax efficient way would be better. Then you get "income" by selling investments when you need money. It's not necessary to tie your income to dividends, which are really just forced distributions. I like to keep equity index ETFs in taxable and taxable bonds in tax-deferred. I don't own munis. There are several threads on the subject, as well as content on the wiki that will help.

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