what are tax free muni bonds paying and are there other types of tax free investments out there?

Question

im trying to put away some cash in a tax free acct for about five years

Answer 1

An investment (usually a municipal bond) featuring interest payments that are exempt from taxes at the municipal, state and federal levels. Also known as "triple tax-exempt".


Municipal bonds often offer triple-tax-free interest payments to investors because the U.S. Constitution forbids the federal government from taxing interest earned on loans to municipalities and states. The state or municipality issuing the bonds makes the bonds tax-free to encourage investment, and the remaining state or municipality offers tax-free status to the issuer at its particular level of government as a courtesy.

However, tax-free status on earnings comes at a price to investors, as these bonds usually offer lower returns. This may or may not be made up to bondholders depending on the amount of income tax they pay: higher income earners will gain more from tax-free investments than lower income earners

Within the universe of short-term munis there are several categories of notes, including bond anticipation notes, tax anticipation notes, and revenue anticipation notes. The key word in all three is "anticipation," which refers to how the notes provide immediate, short-term funds that help bridge any financial gaps until the government receives proceeds from bond issues, taxes, or government sponsored revenue-producing projects.

This article will help you define the rates and whether they will help you according to whether you are in a high tax bracket.

http://www.investopedia.com/articles/04/072804.asp

Answer 2

See the link below. It brings you to a yield page at Bloomberg that has yields for several types of bonds. Municipal Bonds are near the bottom.

The best way to get tax free investments is through an IRA or a 401-K

Answer 3

I am not really good with bonds, but my cousin says that Vanguard Muni bond funds are a great deal and pay about 4.5% per annum.

But I know it depends on your area, you want to get a bond fund from the same state you are in.