Can Municipal Bonds be put into IRA's?

Do the rules allow municipal bonds, taxable and/or non-taxable, to be held in IRAs?

Bonds / Fixed Income, IRAs
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September 2017

Yes, you can buy a municipal bond or municipal bond fund in your IRA. I can only think of one reason to do so. If the investment environment offered a higher Yield to Maturity on municipal bonds as comparably-termed corporate or government bonds (same maturity, credit quality), your IRA would grow more over the same time period with the municipals. That would be a short-term anomaly, though, because tax-free bonds are issued with lower rates. They are tax-free to lower borrowing costs for cities and other government agencies – universities, school districts, sewer districts. Generally, they pay lower interest rates because the lender doesn’t pay income taxes on the interest. However, bond markets are robust and funny things can happen in the short-term. If an anomaly comes, it could make sense for a short while. Otherwise, there is nothing to gain from municipals in an IRA.

September 2017
September 2017
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September 2017