# The muni ladder yields 4.51%, not 3.33%. We had the wrong number. By James Ustby, CFP®, APMA®. Published 2026-09-29. Canonical URL: https://jamesustby.com/articles/nest-egg-the-muni-ladder-yields-4-51-not-3-33-we-had-the-wrong-number > We went looking for the 4.33% that would have saved last Monday's trade and found it on the same page we quoted from. The correction is worth... *This article first appeared in The Nest Egg, my daily email, on 2026-09-29. [Read the original issue](https://retirement-wealth.beehiiv.com/p/the-muni-ladder-yields-4-51-not-3-33-we-had-the-wrong-number). It is educational, not a recommendation for you. The household in it is a hypothetical example, and market figures are as of the date shown and will have changed.* *Every figure below names its document. Every calculation is shown. Nothing here is a forecast.* Good morning. No letter yesterday. The scheduling was mine to get right and I did not, so today carries the piece that was promised for Monday, and it turns out to contain a correction. ## In today's issue **The tape.** Gold gave up 3.54% in a session, the VIX jumped 8.07%, and the 10-year went to 5.234%. Two minutes. **4.51%.** We went looking for a 4.33% municipal yield and found it in the last place we should have had to look. Five minutes. **$15,631.08.** What the correction is worth, and why Friday's ranking now has the wrong number at the top. Three minutes. **One more thing.** A 7.18 basis point window where more yield makes her poorer. One minute. ## The tape Closing levels and session changes, CNBC US markets, September 28, 2026. Gold and WTI crude are front-month futures settlements, measured settlement to settlement; the gold contract is December 2026 and crude is November 2026, unchanged from Thursday. Treasury yields are quoted to three decimals and the change is in basis points. ## The story On September 21 this letter said a household swapping a $1,600,000 taxable ladder into municipal bonds would cut their federal tax 92.5% and end up $14,651.80 a year poorer. On Friday that number, multiplied out over ten survivor years, sat at the top of the week's ranking at $146,518, the largest figure of the week. The instruction for today was to go find the 4.33% municipal yield that would have made the trade work. It was already there. It has been there the whole time. The 3.33% in that letter was the wrong one of three numbers the same fund publishes about itself. ## The position Here is what iShares published about its national municipal bond ETF on September 25, all three figures on the same page on the same day. **12-month trailing yield: 3.39%.** What the fund actually paid out over the last year. **30-day SEC yield: 3.98%.** A standardized measure of the last month's income, net of fees. **Average yield to maturity: 4.51%.** What the bonds inside it will return if held to maturity. The September 21 letter used 3.33%, essentially the trailing figure. The household does not hold a trailing figure. They hold a ladder, and a ladder is held to maturity. The right number was 4.51%, and the gap between the two is **118 basis points**, or $18,880 a year on $1,600,000. The reason the three diverge this far is rates. That fund's weighted average coupon is 4.72 on bonds bought over many years, its NAV total return for the year is **negative 3.51%**, and its average maturity is 9.76 years. Yields rose, prices fell, and the bonds now sitting at a discount will pay that discount back at maturity. The trailing payout does not know that yet. The yield to maturity does. ## The arithmetic **Step one. Fix the other side too.** If the municipal side has to be quoted as a yield to maturity, so does the taxable side. The September 21 letter used 5.00%, a coupon. The closest matched-duration taxable comparison is the 7 to 10 year Treasury fund: effective duration 6.86 years against the municipal fund's 7.10, and an average yield to maturity of **5.13%**, also as of September 25. So the honest pair is 4.51% tax-exempt against 5.13% taxable. That is a ratio of **87.91%**. On the 30-day SEC yields it is 82.23%. Municipal bonds are not cheap by accident right now; they are cheap on purpose, and that ratio is the whole story. **Step two. Recompute the break-even.** The 4.33% figure was the municipal yield that left the couple even against a 5.00% taxable ladder. Against 5.13% the bar rises. Couple: **4.4418%**, or $71,069.49 a year. Survivor alone: **4.1243%**, or $65,989.00 a year. The survivor's bar is 32 basis points lower than the couple's, for the reason this letter has repeated all month. Single brackets are roughly half of joint, so the tax she avoids by going tax-exempt is worth more to her. **Step three. Run the trade again.** Taxable ladder at 5.13%: $82,080 of interest, $13,509.60 of federal tax, **$142,570.40** of after-tax cash. Municipal ladder at 4.51%: $72,160 of interest, $2,610.32 of federal tax, **$143,549.68**. The swap makes them **$979.28 a year better off**, not $14,651.80 worse. Net of the fund's 0.05% expense ratio, 4.46%, it is **$260.88**. Two basis points of margin is not a margin. **Step four. The survivor is where it actually pays.** Her, alone, on the taxable ladder: $17,004.60 of tax, Medicare income of $119,480, and a $1,148.40 surcharge. She keeps **$107,927**. Her on the municipal ladder: $2,062 of tax, the same $1,148.40 surcharge, and she keeps **$112,949.60**. **$5,022.60 a year.** The trade is a coin flip for the couple and a clear win for the survivor, which is the state the entire week was planning for. **Step five. What the correction is worth.** From negative $14,651.80 a year to positive $979.28 is a swing of **$15,631.08**, and not one dollar of it came from the market moving. Friday's ranking put $146,518 at the top of the week as the largest number and the biggest mistake. Repriced on like-for-like yields, that line is **positive $9,792.80** over the same ten years. It belongs near the bottom of the list, and it belongs in green. Left: the three yields iShares published for MUB on the same page on September 25, 2026, against the recomputed break-even for this household. Right: the survivor's after-tax cash across municipal yields, showing the $109,000 Medicare threshold she crosses at $71,600 of tax-exempt interest. Break-even recomputed against the iShares 7-10 Year Treasury ETF's 5.13% average yield to maturity and 6.86-year effective duration. Medicare surcharges and their two-year lookback: 2026 Part B and Part D income-related monthly adjustment amounts, Centers for Medicare & Medicaid Services. Hypothetical illustration of published rates, built to show arithmetic. Not a projection of any reader's result and not a recommendation. ## What the four of them would say **The portfolio manager.** Three numbers, one fund, one page, 118 basis points apart, and every one of them correctly labeled. Nobody was hiding anything. The failure was reaching for the number at the top of the page instead of the number that matches how the money is held. Ask what you own before you ask what it yields. A ladder held to maturity earns its yield to maturity. A fund that never matures does not, which is exactly why these three figures exist. **The CPA.** Notice their real marginal rate on a taxable dollar. Not 22%. On the municipal ladder the first dollar of taxable interest is taxed at **18.50%**, because it drags $0.85 of Social Security in behind it, and the rate falls to 12.00% once the benefit is fully taxed. At 18.50% a 4.51% municipal bond is worth a 5.53% taxable bond. At 12.00% it is worth 5.12%. The taxable-equivalent yield people quote from a chart assumes a bracket this household does not have. **The financial planner.** The uncomfortable part is that Friday's letter got the ranking method right and the input wrong, and the method is what made the error look authoritative. A number at the top of a sorted list carries more weight than the same number in a paragraph. If you build the ranking, you own the inputs. This one is corrected in public, with the arithmetic shown, which is the only version of a correction worth anything. **The estate attorney.** The survivor's $5,022.60 is the number to write down, because it is the one that persists. A couple's break-even is a two-person calculation that ends on a date nobody schedules. Every ladder decision made for this household should be priced twice, once for both of them and once for whichever one is left, and when the two answers disagree the survivor's answer should usually win. It runs longer. ## One more thing There is a window in today's market where a higher municipal yield makes her poorer, and today's yield is sitting in it. Her taxable Social Security is capped at $37,400. So her Medicare income is $37,400 plus whatever the ladder pays, and the single threshold is $109,000. The ladder can pay **$71,600** before she crosses. On $1,600,000 that is a yield of **4.4750%**. At exactly 4.4750% she keeps $113,538. One dollar more of interest costs her $1,148.40, and she does not climb back to $113,538 until the yield reaches **4.5468%**. That is a dead zone **7.18 basis points wide**. Today's 4.51% is inside it. Buying the market yield instead of stopping at the ceiling costs her **$588.40 a year** for the privilege of earning $560 more. The instruction is not buy the highest municipal yield you can find. It is **buy $71,600 of tax-exempt interest**, and stop. ## Tomorrow If the target is $71,600 of tax-exempt interest and the market pays 4.51%, the ladder should hold **$1,587,583.15**, not $1,600,000. Tomorrow we deal with the $12,416.85 left over. It is a rounding error next to everything else this month, and it is the first dollar in this household that gets to be invested rather than engineered. ## Sources - [The Nest Egg, original issue](https://retirement-wealth.beehiiv.com/p/the-muni-ladder-yields-4-51-not-3-33-we-had-the-wrong-number) --- Author: James Ustby, CFP®, APMA®, Wealth Advisor, LPL Financial, Durham and Chapel Hill, North Carolina. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Examples are hypothetical and for illustration only. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA / SIPC. Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.