Should Municipal Bonds be a Tool in Your Retirement Planning Toolbox?

After the Crash of 2008, many investors are choosing to lower their portfolio risk. They are lowering their risk by decreasing the amount of stocks and increasing the amount of bonds in their portfolio. Tax free municipal bonds can be an attractive alternative to taxable bonds for several reasons.

Some investors don't have room in their retirement accounts for their entire bond investments. Rather than placing bonds in their taxable account, these investors can increase their after-tax return by using municipal bonds.

Investors who live in high tax states and have relatively high adjusted gross incomes can increase their after-tax returns by using municipal versus taxable bond funds.

This short story explores the use of municipal bonds. It includes four example cases to illustrate how to determine if municipal bonds are better than taxable bond funds. This short story will help investors to better understand how to optimize their retirement portfolio.