Municipal Bonds

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LindaLouise
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Joined: Wed Oct 11, 2017 6:15 pm

Municipal Bonds

Post by LindaLouise » Thu Oct 12, 2017 5:08 pm

I am looking for another bucket to invest into besides our SIMPLE IRA & ROTH IRA's. We have a 10 year Retirement Plan set up and the bulk of our funds will be going into these two buckets. But, we would also like to invest into something else with our extra funds. We have a lump that we need to invest instead of just leaving it in our savings account. We have an emergency fund in our savings besides this amount. A financial advisor who works for Northwestern Mutual in advising us to put it into Municipal Bonds and I know nothing about them.

PFInterest
Posts: 449
Joined: Sun Jan 08, 2017 12:25 pm

Re: Municipal Bonds

Post by PFInterest » Thu Oct 12, 2017 11:15 pm

What's your tax bracket?
I would run from NWM.

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Tyler Aspect
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Location: California
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Re: Municipal Bonds

Post by Tyler Aspect » Fri Oct 13, 2017 3:06 pm

You can build up your taxable account as the next bucket.

The most important preparation step in investing is to thinking about how you will determine your asset allocation in terms of the percentages of stocks versus bonds. When we are young we can hold more stocks for a higher return. As we grow old then we should hold more bonds to have more stability.

I have presented below a typical asset allocation glide path chart, offering a range of possible allocations between aggressive, normal, and conservative.

Image
  • 100% stock / 0% bond, average annual return 2007 to 2016: 8.65%, 2008 return: -36.6%
  • 80% stock / 20% bond, average annual return 2007 to 2016: 7.93%, 2008 return: -25.2%
  • 70% stock / 30% bond, average annual return 2007 to 2016: 7.56%, 2008 return: -19.6%
  • 60% stock / 40% bond, average annual return 2007 to 2016: 7.02%, 2008 return: -13.9%
  • 50% stock / 50% bond, average annual return 2007 to 2016: 6.84%, 2008 return: -8.3%
  • 40% stock / 60% bond, average annual return 2007 to 2016: 6.48%, 2008 return: -2.6%
Source: http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html

Other instances of recession could be more severe or milder compared to year 2008. It should be noted that year 2009 was a down year as well.

Ticker symbol of VTI and VT are representatives of stocks, while ticker symbol BND represents bonds in the United States.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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unclescrooge
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Joined: Thu Jun 07, 2012 7:00 pm

Re: Municipal Bonds

Post by unclescrooge » Sat Oct 14, 2017 12:01 am

LindaLouise wrote:
Thu Oct 12, 2017 5:08 pm
I am looking for another bucket to invest into besides our SIMPLE IRA & ROTH IRA's. We have a 10 year Retirement Plan set up and the bulk of our funds will be going into these two buckets. But, we would also like to invest into something else with our extra funds. We have a lump that we need to invest instead of just leaving it in our savings account. We have an emergency fund in our savings besides this amount. A financial advisor who works for Northwestern Mutual in advising us to put it into Municipal Bonds and I know nothing about them.
A financial advisor for NWM is just a wholelife insurance salesman.

There is nothing wrong with muni bonds (except for the looming pension crisis). Stick to nationally diversified investment-grade bonds and you should be fine for the next few years.

LindaLouise
Posts: 2
Joined: Wed Oct 11, 2017 6:15 pm

Re: Municipal Bonds

Post by LindaLouise » Sat Oct 14, 2017 7:12 pm

PFInterest wrote:
Thu Oct 12, 2017 11:15 pm
What's your tax bracket?
I would run from NWM.
The Financial Planner that is affiliated with NWM has all of his credentials.

I think we're in a 25 tax bracket

rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: Municipal Bonds

Post by rkhusky » Sat Oct 14, 2017 7:22 pm

A municipal bond fund like Vanguard's VWITX (intermediate tax exempt) would be suitable for a taxable account in the 25% bracket. So would a stock fund like VTSMX (total US) or VGTSX (total international) which are tax efficient. Vanguard's tax efficient balanced VTMFX is about 50/50 US stock/Muni bonds.

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