Muni bonds today

[Kennyt7]

Would you buy 20yr GO bonds at almost 4%? State of Florida

[triad]

is that duration too long for you?

[Auric goldfinger]

Premium? Credit rating? New issue? I own 65 muni bonds, ladder 1-12 year. I’m seeing premiums shrink to almost nothing on many of my bonds , which equates to more than 5% on some. I definitely would not buy an isolated 20 year without a lot more info, and possibly guidance on your part. Fixed income has complexities that make equities seem simple

[Larry Ragman]

No. I long ago decided that individual bonds were too much work and prefer to simply buy an intermediate term muni fund. But I value simplicity and transparency.

[Hatton]

I also own a couple of long term state specific muni bonds. The premiums have dwindled away. I have no plans to ever buy an individual bond again.

[Tangler]

At first glance 4% looks great.

Then I think a little more.

20 years.

Call me an optimist or a fool, but i think in 20 years stocks will beat 4% per year.

Money I plan to spend in 20 years or longer is going into stocks.

If they raise rates to 6-9% then I will buy some more bonds.

Now I have:
1. small amount of I-bonds
2. stock index funds (for long run)
3. Growing cash bucket for when I retire (in next 2-5 years). I want 300-500k in cash bucket for unforseen badness and for SORR when I retire.

[Tangler]

https://www.thebalance.com/rolling-i...eturns-4061795

What am I (a simple doc) missing? Looks like it will be possible to beat 4% over 20 years with stock index funds (obviously with more volatility).

20 years is a longish time.

I suppose it could have a negative return or return less than 4% but that seems unlikely and if so I will just keep buying stock index funds and/or spend less.

A taxable cash bucket, some flexibility and the ability to "take the pain" is my plan.

I am guessing 90:10 outperforms 60:40, over 20 years as it has done for almost, well, forever?

[Kennyt7]

GO bonds. 4%=6% taxable for most

[Kennyt7]

Have owned INDIVIDUAL MUNIS for 30-40yrs and the tax free income is great
A very recent 30yr period had bonds beating stocks
As a retiree a 4% bond(GO) for 20 yrs seems not to be crazy

[Marko-ER]

I also own a couple of long term state specific muni bonds. The premiums have dwindled away. I have no plans to ever buy an individual bond again.

Me too, I own a few individual bond issues diversified over a few strong local municipalities with good administration and credit rating. Rates vary from 1.8 to more recently 3.25 APR, which based on Federal and my local state top tax rate brings the true tax-adjusted yield at 3-5.3%. Maturities are in the 3-5 year period, which is what I am comfortable holding till maturity (i.e. I get my principal back). I never intend to sell these, just hold them, sort of like I would a CD-ladder.

https://www.bankrate.com/retirement/...lculator-tool/

So in short, to the OP no go on a 20 year bond paying "only" 5%. I would consider 7-8% but even then 20 year hold is just too long for me. That may be in part influenced by growing up and later having lived in other countries outside the US where yearly inflation was north of 20% (think Argentina or Turkey right now).

Oh and since others have volunteered this as well: I also hold I bonds for the long term. Had kids late, so I intend to retire and lower my income below the threshold to be able to use Ibonds for education when they are ready for college. My I-bond purchases started when the set portion of the interest was in the 0.5% rate, and if recent spikes in interest to contain inflation continue and are eventually reflected in the set component of the I-bonds and that set component exceeds 0.5%, I will probably cash some out/flip them for some new issues at a higher set component rate. I will probably do said flip during a sabbatical, job change (?? TBD) or another opportune time when/if income drops.

Another tangentially related subject -- I have access to G-fund through spouse's TSP. With bonds doing so poorly lately, even ultra short term bonds like vanguards (ticker VUSB), I am grateful to have switched over bond allocation (~10-15% of that portfolio) from mostly intermediate total-market bond fund, to mostly G-fund earlier in 2021. I know we cannot fully predict where the rates are going, but if you had to hedge and predict at what point would you move away from G-fund back into intermediate bond fund? An inflection point in the inflation rate (i.e. when you can see FED tightening monetary policy has an effect?) Just asking the group.