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Hi bleary,

When I was five years from retirement, I wish I had put 5 year's worth of expenses into a fixed-income ladder. VickiSpouse just retired last July. I'm trying to figure out the cash flow now.

Like you, it's 28% federal and 9.3% CA taxes in general. I decided that holding "bonds" to maturity made the most sense to me. It's an investment I can understand. Bond funds or selling bonds before maturity are confusing at best. ("Bonds" for me include Treasuries and CDs.)

When I last ran the numbers, Treasuries (no CA tax) beat both CDs and Munis. Munis seem aimed at the 33% tax bracket. Do Munis trigger AMT?

Quickly checking 5-year non-callable rates:
CDs 5.10
Treasuries 4.70
AAA Munis 3.75

Assume \$100,000 to make the math easy. You plug in your own numbers.
CD interest = 5100
CA tax on interest = 5100*.093 = 474.30
US tax on interest = (5100-474.3)*.28=1295.20
after tax from CD= 5100-474.30-1295.2 = 3330.5

Treasury interest = 4700
no CA tax. US tax = 4700*.28 = 1316
After tax from T-bill = 3384

Muni interest = 3750. No tax.

That's how I do it.

Vickifool