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prospective municipal bond may present a different yield and your tax bracket may be higher or lower than the 15% example used here. Do the math, as they say, and use the quotient of this basic division formula as a measure of whether you can do better elsewhere. Typically, investors in higher tax brackets do better in tax-free municipal bonds.

TIPS and OTHER POTENTIAL BENEFITS OF INVESTING IN MUNICIPAL BONDS:

1.Get information about the bonds offered: a.) Who will be servicing the interest payments on the bonds, and b.) What is the economic health of the issuing city, county or state. Factors contributing to good economic health are whether the state or local government, as a community, is prospering and growing, has diversity, can show a solid payment history on prior financial responsibilities, and currently has a population of at least 10,000 residents.

2. Look at neighboring states, cities, or counties. Perhaps a neighboring state, city, or county has developed reciprocity agreements. Such a reciprocity agreement may make bonds from these neighboring jurisdictions available on a tax-exempt basis as well.

3. Consider fluctuating interest rates. Changes in interest rates affect municipal bonds. If the current interest rates go down, investors will benefit by an increase in the value of their bonds. The reverse is also true, so factor that possibility into your decision.
Municipal bonds deserve a closer look if your are considering making a wise investments. Their tax-exempt status, their relative safety, and their contribution to your state or municipality are all solid advantages of why you should look at investing in municipal bonds.

Bond investors have an escape not available to stock owners. They can buy municipal bonds and pay no federal taxes at all on the interest. And if you buy muni bonds from in-state issuers, you can avoid state and local taxes as well.

C)529 college-savings plan. The sooner your money is in an account, the sooner it starts to earn tax-free returns. 31 states plus the District of Columbia offer residents a tax deduction or credit for contributing to their state's own 529 plan. Kansas, Maine and Pennsylvania let residents take the deduction for out-of-state 529s as well. Investing a sizable portion of your college savings in a 529 plan makes good financial sense. You can get started with a minimal investment.

Roth IRAs, Municipal Bonds, and 529 Plans are all excellent tax-free investment options that deserve a closer look. Even if you have looked into them in the past, take another look, as they laws and criteria change and now may be the time for you to move forward on one of these options.

Learn more about this author, E.M.Robinson.
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