Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I posted this elsewhere but message came back to post here.We have a diversified portfolio and are two years from retirement. We got a notice saying our no load tax exempt mutual bond fund will cease operations and be liquidated and investors may no longer purchase shares, other than reinvested dividends and other distributions. I was sgoing to take it out and move it into something else but then yesterday I read in one of your articles on your website, that as you hit retirement,one should look for dividends only. Now I'm wondering if I should just leave it there for just the dividends. I consider this one our our safer invesstments but not sure of the repercussions of leaving it in a liquidated fund. May I have your comments? Thank you.
Print the post Back To Top
No. of Recommendations: 0
Tax-free muni bond funds are currently generating about 5.25% tax free and taxable intermediate term bond funds are generating about 7.5%. In retirement your income usually goes down along with your tax bracket, and tax-free is often not as good as regular taxable bonds.

Assume 28% tax bracket in retirement, 5% tax-free is equivalent to 5.25/(1-.28)% = 7.29% taxable. This says that you would be slightly better off with the 7.5% taxable than you would the 5% tax-free.

You should do this calculation with your actual percentage yields to decide what to do in your case.

-rkm
Print the post Back To Top
No. of Recommendations: 0
<< We got a notice saying our no load tax exempt mutual bond fund will cease operations and be liquidated and investors may no longer purchase shares, other than reinvested dividends and other distributions. I was sgoing to take it out and move it into something else but then yesterday I read in one of your articles on your website, that as you hit retirement,one should look for dividends only. Now I'm wondering if I should just leave it there for just the dividends. I consider this one our our safer invesstments but not sure of the repercussions of leaving it in a liquidated fund. >>

Maybe I'm misinterpreting, but I don't think you can leave it there. It sounds to me like the fund is going to liquidate at some future date (did they tell you when?), and are not selling any new shares, except for reinvestments, from now until it liquidates. When it liquidates, you'll be cashed out.

TMF ExRO
Phil Marti
Print the post Back To Top
No. of Recommendations: 0
It doesn't make sense to me that it could be left there either. I better call them.The notice said March 30 the fund would be liquidated and no other purchases allowed other than dividends and other distributions. But if liquidated, how can it collect dividends?
Print the post Back To Top
No. of Recommendations: 0
<< It doesn't make sense to me that it could be left there either. I better call them.The notice said March 30 the fund would be liquidated and no other purchases allowed other than dividends and other distributions. But if liquidated, how can it collect dividends? >>

The only thing I can think of is that there was a distribution planned between the time of the notice and March 30. Or, it's just boilerplate that no one thought about when the notice was issued. In any event, you're wise to call them and find out exactly what's going on.

TMF ExRO
Phil Marti
Print the post Back To Top
Advertisement