Anything wrong with having say 50% of my bond allocation in muni bonds?
Say my AA calls for 30% in bonds. Is it ok to have 15% of my assets in muni bonds?
Later as bond allocation increase, so would the muni allocation to keep up with 50% muni and 50% total bond market.
The reason I am asking is this. Its widely accepted that bonds go in tax deferred, except Muni bonds go in taxable accounts. The rest of the taxable account will be equity index funds. In retirement I will be spending my taxable account first. If there's a market drop (market drop at he start of retirement is the worst), and my taxable account has relatively less bonds and more in stocks, my strategy will result in withdrawing from a bucket that has declined the most by being stock heavy. However, if I have significant muni bonds, then I could hedge against that. But, this of course only if having half of my bond allocation in muni will not cause other problems.
If not 50%, what is a good percentage. Especially given my thoughts above.
Read responses in bogleheads.org