At what income tax bracket does it make sense to in invest in a municipal bond fund?

Question

Looking for a place to park my rainy day fund. Considering a short-term muni bond fund.

Answer 1

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Answer 2

It varies depending upon the yield you would get from a muni bond fund. Currently muni bond funds are paying higher yields than most CDs and money markets making them attractive for any investor regardless of tax bracket. One word of caution. Due to problems in the banking industry, the sale of shares on many bond funds has been frozen. I own shares in a Nuveen Muni Bond Fund and they have been frozen since February, meaning I cannot sell them, they still pay interest but I am stuck with them for now. Before buying carefully research the current liquidity of the particular fund you are interested in. Good Luck.