Understanding the concept of "carried interest," or how to make a ton of money

[dcsmart]

and pay very little taxes.

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http://www.democraticunderground.com/1002180609

[Warpy]

1. Some bonds I inherited got called and I put the money into a MUNI moneymarket

It's only paying 2% at present but that interest is compounded as everything rolls over into the account. It's already earned quite a bit and it's only been there for a month. And being a MUNI account, that is tax free.

So yes, there's a way to make buttloads of bucks while paying no taxes. If I had millions to put into one of those, it would generate a tremendous amount of loot.

[Art_from_Ark]

2. If your moneymarket is only paying 2%, and you've only had it for 1 month

that means you have essentially earned 1/6 of 1% interest during that time, even with the compounding. So, for example, if you invested $10,000, you would have earned a little less than $17 for the month. Does that qualify as "quite a bit" in today's economy?

[Warpy]

3. It was quite a bit more than that

and don't forget I'm used to living on a nurse's pay so it looks like a good bit to me.

And it is compounded.

And in today's economy, where most money markets are paying 1% and a fraction (if that much), it's a good deal, especially since the money is insured.

[Art_from_Ark]

4. What kinds of restrictions are there on withdrawing money?

Most moneymarkets that I know of limit withdrawals to 3 per month.

At any rate, it's quite a change from when I was a kid, when the local Savings & Loan was paying 5 1/4% on simple passbook accounts.

[Warpy]

5. I don't anticipate doing any more than tree a month.

In fact, I don't anticipate withdrawing any until and unless more bonds come up at a decent rate.

Oh, and did I mention that it's taxfree interest?

If you've got a big chunk of change that's not working, consider a MUNI moneymarket. It's liquid enough you can get to it in an emergency, it pays better than CDs, it's tax free, and it's insured.

ETA: the mid 80s were the best time to have money in a money market account: interest rates were double digit.