Thanks. Ok...municipal bonds are tax free, but they are not as secure as U.S. government bonds as they are only as good as the particular municipality. Municipalities do default; the U.S. government will never default on the bonds because it would essentially be the end of the U.S. economy. In terms of safeness of bonds, U.S. government bonds are at the top of the list, most municipal bonds...if you have a good bond advisor helping you are also very safe and secure, but these all have different ratings...so you want to make sure you have a highly rated bond...i.e., a bond issued by the City of Houston is going to have a higher rating than one issued by a small town in South Carolina. You are still better off in good highly rated bonds than just cash because you are not going to earn anything on cash....but, if you don't need to earn any interest, but just want to preserve your principal, there is no risk in cash other than the decreased value due to inflation...as time goes on it buys less.
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