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Retirement Quick Tips with Ashley


Jul 11, 2020

This week I’m talking about tax-free bonds. 

Today I’m talking about how to invest in tax-free bonds. If you’re in a higher tax bracket then these bonds will likely make sense for you (by the way, if you missed my earlier episodes this week go back and have a listen where I talk about who is a good fit for these bonds). 

So if you do determine that tax-free bonds are something you want to invest in, there are a number of ways you can invest. 

A good place to start is with your local bonds. You can find local sewer, water, or school district bonds through a brokerage firm and your financial advisor. Personally, when it comes to buying tax-free bonds for clients, I tend to prefer buying the local individual bonds. You have the advantage of living in the area and having a better pulse on the financial health of the issuer you’re buying the bond from. 

Another great option is buying bonds indirectly by investing in mutual funds or index funds that own municipal bonds. As I mentioned earlier in the week, if you live in a state that has an income tax, you’ll want to look for state-specific bond funds first. There aren’t that many. In Oregon where I live, there are only a handful of options. 

You could also look at buying tax-free bonds through national mutual funds or index funds. These are the most common and if you do a little research and look up best tax-free bond funds or a similar search term, you’ll see that there are plenty of options.

But just like when you buy any bond, you want to be careful and discerning that no matter how you invest you don’t just pick the one with the highest rate. You have to take into account the quality of the bond or bond fund, the maturity date, the interest rate risk, etc. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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