Quick Read – iShares National Muni Bond ETF (MUB) paired with Vanguard Tax-Exempt Bond ETF (VTEB) and Invesco National AMT-Free Municipal Bond ETF (PZA) generates roughly $21,000 annually in federally tax-exempt income from a $500,000 position, equivalent to $35,000 in pre-tax…
xable income for a high-bracket California retiree. Current SEC yields run 3.45% on MUB, 3.54% on VTEB, and 3.67% on PZA, translating to tax-equivalent returns of roughly 6.0% after adjusting for a 41% combined marginal tax bracket. – High-income retirees in steep tax brackets benefit from municipal bond ETFs because interest income escapes federal taxation while remaining exempt from state tax if issued locally, whereas investors in lower tax brackets should favor taxable bond funds instead. – The analyst who called NVIDIA in 2010 just named his top 10 stocks and iShares National Muni Bond ETF wasn’t one of them
Get them here FREE. High-bracket retirees face a math problem that taxable bond funds cannot solve: every dollar of interest income gets taxed at the federal marginal rate, often layered with a state tax bite. The iShares National Muni Bond ETF (NYSEARCA:MUB) sits at the center of a three-fund solution that turns roughly $500,000 into about $1,750 a month of federally tax-exempt income.
Pair MUB with Vanguard Tax-Exempt Bond ETF (NYSEARCA:VTEB) and Invesco National AMT-Free Municipal Bond ETF (NYSEARCA:PZA) and the combined position generates roughly $21,000 annually without adding to taxable income. For a California retiree in the 32% federal and 9.3% state brackets, that is equivalent to about $35,000 of pre-tax taxable income. What MUB and Its Peers Actually Do Municipal bond ETFs hold bonds issued by states, cities, school districts, and authorities.