Welcome to Money for the rest of us. This is a personal finance show on money, how it works,

how to invest it, and how to live without worrying about it. I'm your host, David Stein. Today is

Episode 540. It's titled Beyond Munis, New ETFs for Tax Efficient Bond Investing.

I recently received an email from a plus member who is early retired. They have about two-thirds

of their assets in tax-deferred vehicles, such as IRAs in 401ks, and one-third in taxable accounts.

Their taxable accounts, at least as of early this year, was 100% in stocks.

But their goal is to shift more of the taxable accounts to bonds while also keeping it tax-efficient.

Now, in earlier episodes, such as our bond master class that I'll link to in this episode,

we talked about the logical solution

if you want tax-efficient bond investing, own municipal bonds. Municipal bonds are bonds issued by states

and municipalities. They're exempt in most cases from federal taxes and potentially state taxes if you own

municipals from your home state. One benefit of municipal bonds is their default rates have been

extremely low, much lower than investment grade corporate bonds or clearly non-investment-grade

corporate bonds. Now, we're talking about investment-grade municipal bonds or clearly non-investment-grade corporate bonds. Now, we're talking

about investment-grade municipal bonds because there are also non-investment-grade municipal bonds

that have higher default rates. We're not discussing those today. But if we look at the

cumulative five-year default rate for municipal bonds overall, 0.18%. That's very, very low. There are two types of

municipal bonds. There are general obligation bonds that are backstop by the full faith in credit

of the issuing government. And there are revenue bonds that are backed by fees from

public service enterprises like utilities,

toll roads, airports. One reason that municipal bond default rates are so low is that these municipalities,

these government entities, they have the power to tax and to raise fees. And so that gives them the ability to service

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