OT: How to earn 2.59% on your money in less than 1 year, easily, liquidable too :)

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Submitted by Coronita on April 6, 2022 - 7:14am

Step 1: File an extension for your 2020 federal taxes and overpay your estimated taxes by a lot.

Step 2: In June, file your taxes and get a large refund.As an added bonus, if you owe a small tax penalty for under withholding, overestimate that tax penalty and pay it.

Step 3: Wait for the IRS to recalculate how much you are suppose to get back

Step 4: In July, receive a letter from the IRS telling you they've recalculated refund due, and you overpaid your tax penalty by $19.38, and unfortunately, they cannot send the refund electronically as you requested, but you should receive a refund check in the mail 2-3 weeks from now.

tax1tax1

Step 5: In August, receive a letter that says your refund is coming soon, in 2-3 more weeks.

Step 6: In December, receive a letter that says your refund is coming soon, in 2-3 more weeks.

Step 7: In February 2022, receive a new letter that says you refund is coming soon, in 2-3 more weeks.

Step 8: In first week of April, 2022, finally receive your refund for your 2020 federal taxes, which includes the $19.38 extra for overpaying your tax withholding penalty and receive an extra $171.78 @ 2.59% in interest payment from the IRS for taking so long to give you your 2020 tax refund...over a discrepancy of $19.38

tax2tax2

Step 9: Rinse and repeat for 2021 Taxes

This is like a 1 year CD,except 1 year CD rate is 1% or less, heh heh

Submitted by scaredyclassic on April 6, 2022 - 7:55am.

2.59 perc tax free.

So really 4. Or wait...is this taxable?

Submitted by Coronita on April 6, 2022 - 8:52am.

scaredyclassic wrote:
2.59 perc tax free.

So really 4. Or wait...is this taxable?

Taxable. Of course.

Submitted by gzz on April 6, 2022 - 7:53pm.

I am buying Cal muni bond funds that yield about 5% tax free.

Not risk free but pretty low risk IMO.

They aren’t going to default, but further large rate increases would hurt them.

Submitted by Coronita on April 6, 2022 - 9:21pm.

gzz wrote:
I am buying Cal muni bond funds that yield about 5% tax free.

Not risk free but pretty low risk IMO.

They aren’t going to default, but further large rate increases would hurt them.

Wait CA muni bonds underperformed.fornthe past 2-3 years ,no?

Submitted by sdrealtor on April 7, 2022 - 7:18am.

gzz wrote:
I am buying Cal muni bond funds that yield about 5% tax free.

Not risk free but pretty low risk IMO.

They aren’t going to default, but further large rate increases would hurt them.

As an inflation hedge?

Submitted by phaster on April 7, 2022 - 7:42am.

want to make real money and amass real estate,... start a foundation and collect donations

Submitted by Coronita on April 7, 2022 - 8:47am.

sdrealtor wrote:
gzz wrote:
I am buying Cal muni bond funds that yield about 5% tax free.

Not risk free but pretty low risk IMO.

They aren’t going to default, but further large rate increases would hurt them.

As an inflation hedge?

The YTD of one of my CA muni bonds index is pretty much as bad as the S&P 500 this year. And over the past 5 year it's negative and way worse than the S&P500. One would have been better off just staying in cash.

vcaixvcaix

sp500sp500

It's even worse if you compare the 5 year

vcaix 5 yearvcaix 5 year

At least S&P500 had a really good 5 year

sp500 5yearsp500 5year

Yes, the dividend is federal and state tax exempt but YTD was atrocious overall for the past 5 years...

Submitted by gzz on April 7, 2022 - 12:25pm.

SDR: my RE, fixed rate mortgage and student loan debt, and stocks are all inflation hedges. I don’t need more. Bond funds are more deflation bets.

Flu: I agree muni bonds have done poorly lately, one source said they had their worst quarter since 1994. That’s why you can get closed end CA funds paying a tax free 4.6-5.2% right now. Roughly like a 10% pretax yield.

In three years if 10 year treasury rates go back to 1%, these bonds will have appreciated by about 20% on top of three years of paying tax free 5% income.

The mini rate spike in 2018 lasted even last time. Peak was 3.2% in 11/18 and bottom was 0.5% in July 2020.

The end of the pandemic stimulus bills and a return to divided government means a huge pullback in inflationary gov spending. Giant state surpluses mean less muni supply. Rich always getting richer means more muni demand.

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