Are municipal bonds the smart choice for me?
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I have extra cash in a high-yield savings account, but as a high earner, taxes are taking a big bite out of my interest. Does investing in municipal bond funds help my after-tax earnings, or am I just creating new risks, such as volatility and limited cash access?
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I was thinking about that tax hit, too. One move people often make is shifting some of that cash into municipal bonds. Because the income is usually tax-exempt, your "after-tax" return often beats that of a regular savings account.
It’s definitely a trade-off, though; you lose some of that instant liquidity, and the price can fluctuate. A good strategy is to split your funds: use cash for immediate needs and municipal bonds for long-term savings.