Is There Such a Thing as a Tax-Free Investment?

The simple answer to this question is “yes.” There are three main types: (1) Tax Free Life Policy (2) municipal bonds and municipal bond mutual funds and (3) tax-free money market funds.

It is becoming extremely important today because of the enormous positive gains that exist with No Risk and the end results being payable Tax Free distributions.

Municipal bonds are issued by state and local governments in order to finance capital expenditures; typically, municipal bond funds invest in municipal bonds. Municipal bonds are typically free of federal tax because the interest generated by bonds issued by a state, municipality, or other local entity is exempt from federal taxation.

As an added benefit, most states will allow a state tax exemption if the owner of the bond resides in the state of issue. However, if you purchase a bond outside your area of residency, it may be subject to both state and local taxes.

Tax-free money market funds invest in short-term note of state and local governments and can provide a high amount of liquidity. Money market funds can be invested in a wide range of securities, so it is important to analyze your options carefully before investing.

Money market funds are not insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money market funds attempt to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in such a fund. 

Also be aware that tax-exempt income is included in the formula for determining taxes on Social Security benefits and Tax Free with Life INSURANCE IS NOT. 

In some instances, it may be necessary to limit your tax-exempt income by shifting to other tax-advantaged investment areas.

If they’re in-line with your investment objectives, tax-exempt securities can be an excellent means of reducing taxable income, along with Tax Free Insurance.

If you are considering Retirement Planning, call for a free consultation today.