President Joe Biden signed the Social Security Fairness Act into law on Jan. 5. New rules are expected to go into effect soon, under which some people with pensions who had previously been ineligible for full Social Security benefits will be subject to the same rules as everyone else.
In the Help Me Retire column, Alessandra Malito answered a reader’s questions about the new rules, including spousal benefits. MarketWatch readers left dozens of comments, with some strongly against the changes. You can read the piece, and join the conversation, here.
Big changes for people with student loans
The Trump administration announced this week that it would restart collection efforts on past-due student loans, following a five-year pause. Jillian Berman broke down the details to make it easier for borrowers to understand how they might be affected by the government’s collection efforts.
This is the time to buy municipal bonds
Brett Arends explained how the decline in bond prices since President Trump’s announcement of “liberation day” tariffs on April 2 has altered the spread between market yields on municipal bonds and U.S. Treasury bonds. It turns out that muni bonds are bargain-priced right now.
Most municipal bonds issued within U.S. states and municipalities are exempt from federal income taxes.
Early Friday, the Bloomberg’s 10-year municipal bond index had a yield-to-worst of 3.94%. The yield-to-worst is the lower of a bond’s yield to maturity or yield until an earlier call date, when a bond issuer gains the ability to redeem the bond at will. The yields reflect any current market premiums or discounts to the bonds’ face values.
You can calculate your taxable-equivalent yield for that Bloomberg 10-year muni index using your highest graduated federal income-tax rate. For example, you were in the 22% federal tax bracket as an individual if your 2024 taxable income ranged from $47,151 to $100,525. For married couples the 22% bracket was for taxable income ranging from $94,301 to $201,050. So leaving state income taxes aside, the taxable-equivalent yield for someone in the 22% tax bracket would be 3.94% divided by 0.78, or 5.05%.
10-year U.S. Treasury notes BX:TMUBMUSD10Y were yielding 4.29% early Friday. The interest they pay is exempt from state and local income taxes. So let’s do another taxable-equivalent calculation.
A resident of New York state (but not New York City) in the 22% federal tax bracket was likely to be in the 5.5% or 6% state tax bracket, according to information compiled by NerdWallet. If we divide the 4.29% 10-year Treasury yield by 0.94, we have a taxable-equivalent yield of 4.56%.
And if the taxpayer were also subject to New York City’s highest income-tax rate of 3.876% (for individuals with annual income of more than $50,000 and for married couples making more than $90,00 in 2024), the combined state and city income-tax bracket could be 9.876%. The taxable-equivalent yield for the 10-year Treasury note would be 4.29% divided by 1 minus the combined state and city tax rates. So 4.29% divided by 0.90124 would give us a taxable-equivalent yield of 4.76% for our New York City resident considering the 10-year Treasury note.
Your own circumstances are likely to be different, but these figures underscore the bargain pricing for municipal bonds. And if you are in a higher income bracket, the munis may be even more attractive.
More on the bond market: Foreign investors are selling more U.S. Treasury securities. That is bad news for U.S. borrowers.
How likely is a recession?
It is one thing to have a quick opinion about the direction of the economy. But Joseph Adinolfi has a detailed guide for investors, covering the history of U.S. economic recessions and related warning signs. Here is what to watch if you are worried about a recession.
