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3katz4me

tax exempt, low risk, no AMT investment

3katz4me
16 years ago

Due to some unique circumstances I had the good fortunte of being in a higher tax bracket last year - and will be this year - and possibly the next two years. The good fortune also means I have quite a bit of cash in an interest bearing account that my accountant has advised me to do something about since it's being taxed at such a high rate. I'm also in a state that is about to vote in the highest state income tax rate in the US - and unlike some of the other states in this category we also have hefty sales tax along with just about every other tax anyone could possibly dream up.

Anyway, I know I need to do something else with some of this money but I'm seriously risk averse about this particular cash. I'm all for risk with my retirement investments which I don't plan to use for 15-20 years. However this other money I may want to use sometime in the next few years. Might do some home improvements, might decide I can't stand my job any more and quit, might have unexpected unemployment, etc. I like the peace of mind of having this liquid reserve. I also do not like the idea of investing it in something riskier and longer term - and incurring debt in the event I want to use this cash and the investment is in the tank. I have very little debt and I don't want any more even if that is somehow a better thing to do.

So the tax guy suggests several options most of which I've ruled out for various reasons - some just not available to me like a Roth 401K. The one option I was most in favor of was some type of tax exempt bond type investment - he also specified identifying one that is not subject to AMT (which I also had the good fortune to qualify for this year).

I'm about to consult a person I know who is a CFA who I may start working with - since I've so far not used any kind of financial advisor. However before I plunge into that I thought I'd see if there's an easy answer to this question. What say you?

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