Municipal Bond Forum

Your Web site is full of excellent and useful information on investing in municipal bonds. However, I am 70 and retired (my wife is 68) and we need to produce about $35,000 per year in after-tax income from a muni-bond portfolio for the next five years and then have it adjusted to cover cost-of-living increases as they occur. I would hope to live to 90, or about 20 years from now, which would be my investment horizon. In my case, the use of 30-year bonds would not be feasible, (in 30 years I would be 100). Therefore, what is your strategy/opinion on investing in intermediate-term munis (20- year bonds) in our particular case?

R.S., Florida

Your Web site is excellent, concise, thorough and complete. One piece of information I was not able to find was the physical location of FMSbonds. Where are your headquarters located and where do you have branch offices? Do you have any offices in New Mexico? I am kept well informed of new bond offerings by Edie Nasello, for which I am most grateful.

A.C., New Mexico

I’d like to get smarter about muni bonds. I want to learn more about bond ratings and bonds that aren’t rated (NRs). I’d like to know how to tell if the bond has been making payments and learn any important news such as credit upgrades or downgrades for the writers. Also, there are different bond types: Health Care Facility Revenue Bonds, Airport Revenue Bonds, Industrial Development Revenue Bonds, etc. What are the default risks or down sides to these different classes of bonds? How do I find out when their bond ratings were last reviewed? I’d bet that there is some honey to be found in bonds that aren’t rated, bonds whose ratings have not been reviewed in some time, bonds with higher coupons, trade below par and may be callable. I would suspect these would be available in odd lots.

C.S., Florida

I am 55, looking to retire and need to produce about $350,000 per year after-tax income from a muni-bond portfolio for the next 10 years, and then have it adjusted to cover cost-of-living increases as they occur. I would expect to live to 85 years, or about 30 years from now, which would be the investment horizon. I am a California resident and thus prefer a CA muni portfolio so that it is double tax-free here. How do YTMs (yield to maturities) on 20- to 30-year munis compare using out-of-state issues vs. CA issues, assuming comparable risk parameters? Is there a better annual cash-flow return from a national muni-portfolio if one were to relocate to a state like Florida? I have read your strategies page and have learned that committing to the highest yield instead of laddering (which is what most financial advisers suggest!), is the better strategy. Therefore, what is the best strategy to achieve this investment scale and how much time will it take to assemble such a portfolio?

S., California