This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What To Do if Washington Takes Your Retirement Dividends Away

For New York City residents earning between $90,000 and $500,000, the income tax rate during 2011 was 3.648%. Using that rate and the above state tax rate, the taxable equivalent yield is 4.90%.

Even without considering the tax advantages, the yield on the New York Triborough Bridge and Tunnel Authority bond is higher than some corporate bonds with the same investment-grade ratings.

An IBM (IBM) bond rated Aa3/AA- with a coupon of 1.875% expiring on August 1, 2022, was trading Friday at a yield of 2.35%.

Why would a corporate with the same rating trade at a yield only slightly higher than a muni of the same quality? The answer is that the market has been rough for municipal bonds, because so many municipalities are having budget difficulties, and some analysts, including Meredith Whitney in September 2010, expressed fears that there could be a significant number of municipalities defaulting. There have been a few defaults, but nothing like the "hundreds" of defaults that Whitney expected.

The New York Triborough Bridge and Tunnel Authority bond example cited above is for a new issue, and it's too late to get in on that one. Municipal bonds are thinly traded, being snapped up immediately by institutional investors and individuals when they are issued. The best approach is to talk to your broker, request information on upcoming municipal issues, and try to make purchases "off the shelf," which may be your only way of making these investments.

Municipal Bond Funds

You can also consider a municipal bond fund. Of course, since bond prices move in the opposite direction of interest rates, holding shares in a municipal bond fund can require a lot of patience, as you watch your share price drop while rates are rising. But if your long-term objective truly is to generate current income, you should be able to stay committed and ride out the price fluctuations over the years.

TheStreet Ratings provides free ratings for all exchange-traded funds trading on U.S. exchanges that have operated for one year, and also for open-ended funds that have operated for three years. The ratings evaluate and measure ETFs and funds according to variables which include the Fund Family, Fund Style, Performance, Net Assets and Expense Ratio.
3 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
APU $45.58 0.26%
BAC $18.16 1.57%
JPM $68.94 1.31%
KMP $102.03 1.98%
WFC $57.96 0.98%

Markets

Chart of I:DJI
DOW 17,751.39 +121.12 0.69%
S&P 500 2,108.57 +15.32 0.73%
NASDAQ 5,111.7330 +22.5270 0.44%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs