Tax-equivalent yields fluctuate over time. The ratio you are seeing may be reversed next year, or not.I have some short term savings that typically I put in Fidelity money market, USFR or SGOV type investments. However, next year I suspect to be in the 32% tax bracket. I was surprised when running the numbers that even in 32% tax bracket, munis don't seem to make sense. Am I missing something?
I compared the following:
SGOV - 4.00% SEC yield (32% tax bracket, state tax bracket) = after tax yield of 2.72%
VMSXX - 2.47% SEC yield (would pay state tax Michigan 4.25%) = after tax yield of 2.36%
The odd thing is even if I run it at 37% federal tax bracket, SGOV is still better. What am I missing? When do munis make sense?
And the ratio can vary over duration. I’m getting after tax of 3.23% for Intermediate Tax Exempt (VWIUX) vs 2.51% for Intermediate Treasury (VSIGX) at 32%.
Back when I was using muni funds, the break even was at about 28%.
Statistics: Posted by rkhusky — Sat Oct 25, 2025 8:40 pm — Replies 1 — Views 234