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May 26, 2011     The Carlisle Citizen
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May 26, 2011
 

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Page Twelve o The Carlisle Citizen • Thursday, May 26, 2011 "Munis" Can Still Work for You Even in Tough Times Submitted by Joe Schettler, Rep for Edward Jones in Carlisle No matter where you live, the chances are good that a state or local govern- ment near you may be hav- ing some difficulty in bal- ancing its budget. As a citi- zen, you're probably con- cerned about how this situ- ation will affect your life and your community. But as an investor, you may also wonder how this might affect any municipal bonds you own. Fortunately, the outlook might be brighter than you think. Of course, taken to the extreme, the financial chal- lenges of some state and local governments could conceivably affect their ability to fulfill the pay- ment obligations on their municipal bonds. But in- vestment-grade quality municipal bond default rates historically have been very low, especially when compared to those of corpo- rate bonds. And munici- palities are cutting spend- ing, eliminating nonessen- tial programs and, in sortie cases, raising taxes Or fees. In short, they are taking steps that, while poten- tially painful to residents, are likely to help them con- tinue making timely pay- ments of interest and prin- cipal on their municipal bond obligations. Further- more, municipalities must still fund various projects, and even one bond payment default could impact their future ability to borrow money in the form of new municipal bonds. So are munis right for you? The answer depends on your situation -- your goals, need for investment income, current investment mix, risk tolerance and so or;. But if you want to re- ceive interest payments that are exempt from fed- eral taxes, you may well be interested in exploring municipal bonds. Keep in mind, though, that munici- pal bonds may be subject to state and local taxes and the alternative minimum tax (AMT). In addition, you'll want to be familiar with "taxable- equivalent yield." Typi- cally, municipal bonds pay an interest rate that's lower than those paid by taxable bonds. Since this interest is free from federal taxes, however, the rate may not be as low as it ap- pears. The taxable-equiva- lent yield measures the rate you'd have to earn on a taxable bond to match the income from a tax-exempt municipal bond. And the higher your tax bracket, the higher your taxable- equivalent yield. Suppose that you're in the 35% marginal tax bracket, and you are con- sidering a tax-exempt mu- nicipal bond with a 3.33% yield. You simply divide 3.33% (0.0333 in decimal form) by I minus 0.35 (your tax bracket), which would give you 0.0512, or 5.12%. In this tax bracket, a muni with a 3.33% yield is equivalent to a taxable bond with a 5.12% yield. (This example is for illus- tration purposes only.) Keep in mind that, before investing in bonds, you should understand the risks involved, including interest rate risk, credit risk and market risk. Bond investments are subject to interest rate risk such that when interest rates rise, the prices of bonds can de- crease, and you can lose principal value if the in- vestment is sold prior to maturity. So it's best to dis- cuss municipal bonds With your financial and tax ad- visors. By adding quality mu- nicipal bonds to your port- folio, you can show faith in your municipality, your in- vestment dollars can help support worthwhile projects in your area, and you receive a steady source of tax-exempt income. This article was written by Edward Jones for use by your local Edward Jonds Financial Advisor. Edward Jones, its em- ployees and financial advi- sors cannot provide tax or legal advice. Please consult your attorney or qualified tax advisor regarding your situation. Dental Professionals PLC 65 School Street ~ Carlisle 989-3180 • Coverage, Premiums & Cash Values are guaranteed to age 110. • Policy limits increase automatically at age 18, and again at 25 - with NO premium increase. • An optional annuity benefit provides even higher cash values: for emer- gencies, for college expenses, or even for the deposit on their first home. 00uto-00 Insurance CENTRAL IOWA INSURANCE Carroll Isley • Todd Isley • Steve Renfrow Patti Isley • TJ Cataldo • Linette Thoman • Toni Prall 120 S 1st St • Cartsle • 515-989-0047 701 W 2nd St • Indianola ° 515-961-5301 113 NW 2nd St • Leon ° 641-446-8535 108 E Washington • Osceola • 641-342-2264 301 NE Tdlein, Suite 4 • Ankeny • 515-963-8902 Slices of Life by Jill Pertler Copyright 2010 I'm all right, how about you? One of the most challeng- ing aspects of living with teenagers is confronting their vast and superior knowledge. Every parent who's been there under- stands a teen's life experi- ences have brought them to the point of knowing almost everything - or maybe there's no almost about it. I'm okay with my kids thinking they are right- as long as they keep their opinions to themselves. When they share their ideas and try to exert them on others (most specifically me), there's where the di- lemma comes in. My teens believe they are right. That's their right. Unfortunately their "right" is often in direct op- position to my own (wise and learned) point of view. I also believe I am right, and we all are aware two rights do not make a left. (It takes three rights to do that; go ahead try this little experiment yourself.) Which is exactly what my household experienced the other night when my hus- band and son ganged up on me - three rights. This was a rare occurrence, because usually my husband is as learned and wise as any old owl. On this occasion, how- ever, he didn't give a hoot about the logic of my rea- sonable opinion. I should have known bet- ter than to engage them in discourse on the rights and wrongs of any given topic. I avoid doing so with the men in my family. They are competitive and hate los- ing. To compound matters, my son is left-handed. Never argue with a lefty about being right. So the three of us stood at a standstill. They were right and I was right. We probably should have done the three rights thing, made a turn in the opposite direction and left the situ- ation alone. Maybe went for ice cream and called it a day. It's hard to leave things alone, though, when you think you are right. A.m I right? I forget what we were squabbling about, but their claim of correctness was okay with me. "Let them be right" is one of my lesser- publicized mottos. My im- pediment came when they attempted to find fault with my own rightness. They accused me of think- ing I am always right. Like there's something wrong with that. Of course I always think I'm right. It would be illogi- cal, unintelligent and inap- propriate not to. I haven't met anyone who sets out to find an opinion they believe to be wrong. What would it say about my sense of self- respect and self-esteem if I didn't think enough of my- self to choose to believe I was right? We all think we are right, It's the nature of things. My husband and son fur- rowed their brows at my admission. Was it an ad- mission or declaration? I could almost see their brains churning. Because they weren't sure, they couldn't be certain whether they were winning the ar- gument. " If there's anything more important than being right, it's winning an argument. Or maybe not. What did I have to gain by pursuing this one any further? My guys weren't on the thresh- old of giving up, and I had stuff to do - like pet the cat and watch the weather channel. I ended my filibuster by offering one last tidbit of logical information regard- ing the importance of se- mantics: Believing you are right and being right are two different things. I al- ways believe I am right. But I never know for sure. I could be wrong. We all could be. Their jaws dropped at my disclosure. I grabbed the cat and the remote, and left it at that. Jill Pertler, award-win- ning syndicated columnist and author of "The Do-It- Yourselfer's Guide to Self- Syndication." is collecting fans on Facebook on her Slices of Life page. Email her at pertmn@qwest.net; or visit her website at http:! /marketing-by- design.home.mchsi.com/. .. ..: