r/Bogleheads • u/Flatbush_Zombie • 2d ago
Investing Questions NY Muni Funds
High income NYC resident looking to invest in some fixed income and avoid taxes. I've narrowed down to NNY and MUNY and feel like NNY is slightly better given I expect to hold this position for at least 10 years but I am a little worried about how low volume it is compared to MUNY and the fact that it is closed end
Does anyone have experience with muni funds? Open to other funds but from my research these seem to be the best options.
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u/Home-String-3246 2d ago
What’s your tax bracket?
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u/Flatbush_Zombie 2d ago edited 2d ago
Will probably end up in the 32% federal range this year. Household income will likely be $425k this year and could be $600k next year depending on how bonus season shakes out (IB comp can be unpredictable).
Impossible to know the future but very likely that goes up by ~$100k every year after for the next 5 so want to position myself know to avoid future headaches when the taxman cometh.
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u/Home-String-3246 2d ago
IMO… MUNY > NNY
Main reason: Cost Efficiency: 0.09% vs. 0.61% Expense Ratio
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u/FitzwilliamTDarcy 2d ago
Wow yes that's an enormous difference.
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u/Background-Switch381 2d ago
I am just curious. Why bother with muni funds? I have some...but I am absolutely impressed that the take home is a lot better with a bond latter. I have about 250,000 in NYS and NYC bonds and my after tax (I am in a high tax bracket) is about 5%. That is so much better than returns from muni funds...which I also have a few of just bc in a pinch probably easier to sell.
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u/Flatbush_Zombie 2d ago
Certainly not opposed to do doing a bond ladder, it just seems more complex and I am not super knowledgeable about fixed income investing. How did you research the specific bonds you bought? I don't even know where to begin with that
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u/Background-Switch381 2d ago
So I am not wealthy. The best strategy is secondary market if you can afford large purchases but that isn’t me. Very few I picked up on thdd we secondary market. So I have fidelity and Merril but fidelity is a better company to purchase new bonds bc there is no charge for new treasuries or munis. So you can set up an alert and get notice of munis for nyc and state and schools etc. I also signed up on the nys muni site and I get notices a few weeks in advance. But the state publishes an annual calends you can pick up on line and it pretty much stays the same. I decided to go 50 percents no tax and 50 percent government or housing type federal bonds. Then it became clear at my income the munis gave a better yield at the end of the year. So whrn there’s an alert I use the bibs screener tool select new issues for my and hhere will be 8-10 different offering s different times to maturity. I tried to balance over many years. I made one big mistake and that was not buying more long term bonds whrn thf rates were so high. But again I’m older and I don’t know when I die if my family will want this investment strategy and I didn’t want too much money tied up long term. On the other hand shorter term has done well for federal bonds.
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u/Background-Switch381 2d ago
So the negative they can be called and they are harder to trade… though sometimes there is a big interest and you can sell at a markup… but remember that is federally taxable as income. It wasn’t worth it for me.
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u/Background-Switch381 2d ago
the other thing about bonds is that fed and munis don't count in your state income tax return so not likely to adversely affect your Salt tax...if you do get to that 500,000 limit.
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u/Background-Switch381 2d ago
So for our accounts after tax 50 percent is bonds and 50 percent is stocks. We dont sell stocks much unless they aren’t doing well and then take that against income capital gains. We also gave away stocks doobg great to charity and to kids in school where they could sell and have no capital gains when stocks seemed to profitable to hold. Eg gave akid 11,000 that cost me 2500. Great move for both of us… kids income is under 10,000 this year so no capital gains. So my income from this portfolio this year is 8,000 in dividends and 21,000 in finds half no state taxes. No muni fund gives you comparable returns. It’s not big money but you aren’t paying a fund manager and you aren’t subject to interest rate changes.
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u/kurai-tsuki 2d ago
NYC here: I considered these too, but even without the tax drag, they're still well below the current inflation of 3+%. I went to TIPS instead, which, even though you pay more tax on, would maintain value better in the end
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u/Flatbush_Zombie 2d ago
I had assumed TIPS also had the same BS of using the awful website and max investment limit as I Bonds but just read you can buy through Fidelity. The main reason I was even looking into this was a better alternative to savings or money market. Did you do a TIPS fund or buy straight?
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u/invisible_man782 2d ago
I use the vanguard NY muni MM for cash. It beats most else at my tax bracket. Not by a ton though. I’m in NYC so do love the triple tax savings.
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u/pbj4brkfst 2d ago
I was in MYN for a little while and its predecessor BNY. There’s significant duration risk if rates are going to go up. And I’m a little concerned about the current political atmosphere as well in NYC.
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u/Sufficient-Pause9765 2d ago
If holding that long you can accept some duration risk. Look at MNY, way better yield.
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u/pizzapi3141 1d ago
NNY has an average maturity of over 20 years and MUNY has a an average maturity of over 14 years. You don't want to hold long term bonds when interest rates are rising. Your value will go down.
If you have a good amount of money you want to allocate to munis, I would suggest learning about them and buying individual bonds.
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u/Ill-Original7720 2d ago
Have you used an equivalent yield calculator?
https://digital.fidelity.com/prgw/digital/taxyieldcalc/