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Taxable munis for 401k
Q
I was recently laid off from Anheuser-Busch InBev after 27 years and now find myself trying to figure out what type of investment to roll my 401k into. My financial adviser recommends taxable municipal bonds as a long-term investment. That said, our friends and family think they are too risky and can’t believe we would consider this type of investment. Can you shed any light on this subject?
A
James A. Klotz responds:
We agree with your financial advisor and are curious as to which investments your friends and family think are less risky.
You can purchase taxable municipal bonds of the highest quality, secured by either the taxing power of a highly rated issuer or backed by an essential revenue stream. These bonds also enjoy a 35% percent subsidy from the federal government.
Investment grade municipal bonds enjoy a much lower default rate than corporate securities and are obviously less risky than equities.
Today, you can earn approximately 7% on AAA insured taxable municipals.
Start here.
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