When it comes to investor strategies for covering college tuition for their families there are certainly plenty of different ways to go about it.
Beyond 529 Plans, some investors gravitate towards lower-risk strategies to help bolster their nest egg for those costly college expenses. However, considering how important a college education is, banking on the equity market to stay stable over a long time period can be a bit risky. As such, fixed income strategies have at times offered a more suitable application, due to the advantages of steady cash streams.
See More: Three College Savings Plan Tips for 2026
That being said, fixed income approaches have their own hurdles to overcome, with one key hurdle being taxes. Taxes tend to eat into the income gain that investors are looking to add to their nest egg, especially over the long term.
Municipal Bond Ladders Offer a Solution to Tax Troubles
Fortunately, there are tools available to make tax hurdles much more manageable. For instance, one could look to municipal bonds to lock in yield, free from federal income tax.
The Northern Trust 2035 Tax-Exempt Distributing Ladder ETF (MUNB ) can help investors tap into the opportunities that municipal credit offers. MUNB offers streamlined access to a collection of municipal bonds through a laddered portfolio.
This fund’s laddered portfolio has each rung separated by calendar years ranging between 2025 and 2035. From there, Northern Trust’s portfolio team fills the rungs with munis that reach maturity during that specified year.
What makes MUNB — and the distributing ladder ETF series as a whole — stand out compared to other bond ladder ETFs is how principal is handled. Traditional bond ladders tend to roll principal over into the next rung whenever one of their underlying bonds reaches maturity. However, MUNB gives the principal back via annual distributions, which can help provide an additional source for amplifying college savings.
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The distributing ladder approach helps MUNB harness the advantages of municipal bonds to deliver tax-free income for goal-minded investors. With the cost of college tuition looking as perilous as always, opting for a consistent, structured approach to municipal bonds could help investors make sure they’re ready to handle the bills that come with higher education.
For more news, information, and analysis, visit the Bond Ladders Content Hub.
Disclosures:
ETF investing involves risk, and principal loss is possible. Shares of any ETF are bought and sold at market price (not NAV). They are not individually redeemed from the ETF. Brokerage commissions will reduce returns. The net asset value of the Northern Trust ETFs will decline over time as income payments are made to shareholders. Individual bonds carry an obligation to fully return principal to investors at maturity, however ETFs have no such obligation.
Before investing, carefully consider the investment objectives, risks, charges, and expenses. This and other information is in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest.
Northern Funds Distributors, LLC, distributor. Northern Funds Distributors, LLC and FlexShares are not affiliated with Northern Trust.
All investments are subject to investment risk, including the possible loss of principal amount invested. Investments do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Not FDIC insured | May lose value | No bank guarantee
