What Are Municipal Bonds? Are Municipal Bonds Safe & TAX-FREE? (Municipal Bond Investing Basics)
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- čas přidán 16. 09. 2023
- 🤔 Interested in tax-free bonds? Watch on & see which muni issuer defaulted with $74 billion of debt & how safe munis really are!
Plus - what are the two different types of municipal bonds & who might they be best suited for? That's what I'll be answering in today's municipal bond investing 101!
👉 Help keep our one-of-a-kind videos unbiased & sponsorship-free through channel membership - become a super-supersaver member: / @diamondnestegg
#jenniferlammer #bonds #fixedincome
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REFERENCED IN VIDEOS
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SOURCES
www.sec.gov/news/statement/li...
www.sec.gov/munied
www.schwab.com/learn/story/ch...
www.moodys.com/research/US-Pu...
www.wsj.com/articles/puerto-r...
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Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
Remember that income from a tax-free bond held in taxable accounts will be included in your MAGI(modified adjusted gross income). If this (MAGI) income then exceeds certain thresholds, Medicare beneficiaries will be subject to an "adjustment" to your monthly Medicare premium, known as IRMAA. Be careful!
Correct! The IRMAA "surcharges" seem particularly devilish and unfair. Your social- security check is garnished, so any tax-free residual on that income is wisked away to pay your Part B premium. Your premium is thus not based on your health risk, or history but rather your ability to pay(for someone else). Furthermore, the charges are based on income 2 years prior to the current year and there is no way to accurately predict the thresholds to which you will be held. Remember the story about the 2 foxes and a chicken who rely on a vote to decide what's for dinner! Best wishes!
yes but you can protest if you happened to have a windfall at the 2 year prior mark, make a case for an average or another year being typical@@eikoGoldstein
Good point. Note that the same, or worst, applies for the MAGI to qualify for ACA healthcare subsidies.
Thanks, I was considering muni bonds to lower my income to keep my VA low income medical coverage. But if the income shows up on my fed tax form it won't work. Only option I see is buying growth stks and just selling enough for some income. But don't want to do that if a recession is around the corner and lower stk prices..so I stick with high yield and get kicked out of the VA next yr.
@@Jl-620I just want to know if you can do stocks without bonds
Excellent presentation as always. Thank you!
Thanks for all the great info! Best subscription out there!! You’re a gem, Jen!
One thing to keep in mind if one is retired, muni interest will impact the taxabiity of SS benefits. Muni interest is considered income when determining combined income and the taxability of benefits. It's not until one reaches 85% of benefit subject to taxation that muni interest for retirees is completely tax free.
cool, nice straight forward approach ty.
Thank you, Jennifer. Super informative video.
Thanks for posting this video, Jennifer! You have made muni videos before and fresh videos like this help keep the topic in the forefront of my mind. 👍
Thank Jen!
Thank you, Jennifer! It's always nice to learn something new.
Thanks for the enjoyable and informative presentation. At this point, munis aren’t paying enough to be more profitable than treasuries for me.
Thanks for the excellent content. I hold a handful of GO bonds from my state which I plan to hold to maturity. Question about the GO bonds issued by cities in CA for the funding of schools: are they backed by CA, or just the city in question?
Best channel. Thank YOu
I live in Illinois and we always have the worst financial situation and corruption so I never trust buying anything from Illinois.😒
lol 😂 same
Never understood these types of comments why don’t you move if you don’t trust your state. I am your neighbor and see Illinois people come here all the time.
Great info on Munis. Thank you! I recently bought 2 muni funds thru my brokerage account. (my retirement income has hit the 22% tax bracket {SS, pensions, annuities} so I am trying to minimize the tax bite). Not sure if I would be brave enough to pick individual munis - but maybe I will!
"...when they still called it junior high school..." That cut me pretty deep. Thank you for this informative video.
Thank you very much. Next time can you have a presentation on de minimis and tax implications. Are tax free municipal bonds really tax free [even if you live in the same state as the bond] or it depends on the de minimis principle?
did the bondholders in Detroit or Puerto Rico ever get future interest payments or return of their principal?
these work for marginal tax rates over 32%.
Ty ty ty!!!! 🎉❤🎉
I think DC residents can buy any state muni bond or fund and are exempt from paying DC taxes. This is the only exception that I know of.
I was excited to purchase my first muni on Fidelity upon watching this video. Got to the new issue page and literally had 13 options. The only one in my state had no rating and I got a message that Fidelity believes it is "unsuitable" in any quantity. The rest were all in Texas and looked very similar with unattractive yields. Is it normal to have such little options?
is there a way to see when a bill was brought how much i paid for it and the money it earned in interest until maturity on the treasury direct web site'. I tried history but it does not show all info? thank you for your help, ginger
Is there a maximum amount that you can invest in any one time or year? Federal was 10K.
How is MUB treated for tax purposes ?
Very interested in both individual muni bonds and ETFs, and how to choose/buy on Fidelity!
me too. hopefully Jennifer can do a video on how to buy California munis on fidelity 🙏
Hi there - I see you've recently joined our SSS-membership. Welcome! Hopefully, the recent muni videos answered your top questions? ETFs may take us a bit more time to get through as we're working through quite a long video list.
Municipal bonds seem to be mostly callable, so i dont understand why one would invest in those since they could be terminated at any time!?
Where do you see Canadian Muni 15 year bonds yields in 2024 onwards. Presently they are around 4.3%
I would suggest CEF munis that are focused on your state as you will get tax savings and the benefits of the fund owning a collection of munis within, less risk if there are a few bad apples too. Treasuries still beat the munis but that will eventually fade and CEF munis have been hammered so price to get in has been lower historically.
@@geoffboston9740 yep, no different than an ETF or MUT but you will be spreading your risk across numerous munis in one shot.
How high is high enough (in reference to marginal tax bracket) to make it worthwhile to invest in an out of state muni? Thanks!
It depends on your state tax rate. Mine is 0% so it makes absolutely no difference to me.
I understand that most if not all municipal bond etfs are tax free. Does that mean if I invest in them in my SEP IRA, that there won't be any tax implications on dividends/gains?
When figuring the De Minimus threshold how do we find out what the par value is of a bond we are looking at? Also the .25% x full years to maturity what if it's say 10 months? Thanks.
It is generally quoted as $100/ $1000
As we watch this, the Birmingham Council , UK is in a bankruptcy crisis. It is the largest local government fiscal entity in all of the EU.
Muni ETF's please
Are US Treasuries expected to rise to 6% again as the US comes closer to the debt ceiling default?
Rates over the last 2 months have barely moved. Even though rates are close to 5.4-5.5, I think this is it.I would be glad if rates stayed at this level.But there are also a lot of people struggling because of these high rates.
Jennifer may have an update on this, but if memory serves she had reiterated in July/
August that there is a ton of issuance in the fall coming, which may put upward pressure on interest rates was her conclusion. There are a lot of moving parts here and several unknowns both near-term and intermediate term, predicting interest rates is very difficult.
As a current California resident California is as credible as Bernie Madhoff.
Where do I go to purchase Muni’s
I've found Schwab & Fidelity to have a decent offering - can talk more about this in our Q&A. And please do watch the member video on munis first before going ahead (it should be posted some time this week). There are a few common pitfalls to watch out for.
Investing I detroit and pr,itself risky
Just going to those places is risky.
IMHO, would also be wary of munis from CA and NY. Pick from states which have more solid financial health.
@@brucesmith9144 yea places you think might be responsible
@@brucesmith9144 Yep NYC had its own crisis in 1975 and and was put into receivership under NY State.
Being from the other Big D, I’d recommend staying away from anything BigD
Low tax-equivalent yield means munis rarely make sense to buy in my opinion, especially the highest grades.
That really depends on your marginal tax bracket & personal goals, circumstance and expectations
Thank you! Great video!
There are plenty of investment grade munis with decent yields. There is no reason to buy a low-yielding bond unless you get it at a discount.
Is muni bond interest really tax free??? It’s added to your income to determine SSN taxable income threshold, so it really is not 😢, unless it’s minuscule 😂
Would buying Municipal Bonds ( tax free) make sense if I purchase them in a IRA account ( no taxes until I retire)
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WATCH NEXT (member videos)
⭐ August Live Member Q&A: czcams.com/users/livei0TPm72LbsQ
⭐ Bond Diversification Strategies: czcams.com/video/aOpvUf5OYHo/video.html
⭐ Agency Bonds 101 Deep-Dive: czcams.com/video/ggjZSBS4TVc/video.html
⭐ Seven Risks Of Bond Investing: czcams.com/video/LBCa2D95cPM/video.html
⭐ How Do Bonds Work: czcams.com/video/y3OnquIh-qM/video.html
Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.