What are the pros and cons of tax free municiple bonds?

It was recommended that I switch a CD that is coming due to get more interest. Sorry - it should be municipal. Asked by Mercedes 1 day ago Similar questions: pros cons tax free municiple bonds Business > Taxes.

Similar questions: pros cons tax free municiple bonds.

Municipal bonds are attractive to many investors because the interest income is federal tax exempt, and if the bond are issued by your state they may be free of state and local tax as well. It should be pointed out that if you currently receive Social Security benefits, the tax exempt income is added to the Social Security benefit to determine if you need to pay tax on your SS and what percentage is subject to tax. The bond is also not guaranteed like your CD.

If you buy a Municipal bond you are at the mercy of the state or locality issuing the bonds. During the 1970's and 80's, the Washington Public Power Supply System financed the construction of five nuclear power plants though the issuance of billions of dollars worth of Municipal Bonds. In 1993, due to poor project management, construction on a couple of the plants was canceled and the completion of the others seemed unlikely.

The set up arrangement backing the bonds were ruled void by the Washington Supreme Court. As a result, WPPSS turned out to be the largest municipal debt default in history. It became known as the "Whoops" default.So you need to perform due diligence on your bond choices considering the precarious situation of some states, cities and towns as a result of the current economic situation.

The Wells Fargo advisor said they only invest in triple A bonds. I really appreciate your help on this. He also said they don't just invest in local city and state bonds.It is across the country.

Mercedes 13 hours ago .

WPPSS bonds were AAA when first issued. Make sure you have the advisor discuss all the internal annual fees with you,(if any. ) Fees are usually stated in basis points.100 basis points = 1%.

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