Over the past few days, I have been promoting the value of municipal bonds. Right now, they offer a better bargain for your long term savings than CDs.
One of the things I dislike about CDs is that they are really just a holding place for your money.
Money falls into 2 main categories -
*Liquid Money - Money that can be used now or held in an emergency fund (about $10,000
or 3 -6 months of expenses).
*Invested Money - Money that is invested that you don't have an immediate need for.
Looking at those two groups, CDs are kind of a "tweener" - your money seems tied up, so you
can't get to it. Also, the rates are so low currently that it really isn't invested either. Talk about being caught between a "rock" and a "hard place"!
CD yields are so poor, that you may even consider the idea of early withdrawal to take advantage of better (and tax FREE) yields with munis. The penalty usually is forfeiting some interest (WHAT interest??), as much as 6 months.
If you had $10000 in a CD, paying 2% ($200/year, taxable), you would lose $100 to the bank. If you re-invested it in a 5% muni bond, you would earn $500 on the same amount, and not pay federal taxes (perhaps even no state or local taxes) on the interest.
You do the math.
Here are a couple of other articles which support the idea of using muni bonds.
MARKET WATCH - "Muni Yields Aren't Puny"
KIPLINGERS - "Steals In Tax-Free Bonds"
Warren Buffett likes munis too, and you could do a lot worse than listening to Mr. Buffett!
For more information on municipal bonds, or any other savings ideas, please contact me at