But there's one thing that quietly climbed alongside them, and it's sitting in plain sight on the same brokerage app you use to check your 401(k): municipal bonds.
Muni bonds are the debt cities, counties, and school districts issue to build roads, fix water systems, and keep the lights on.
For years, their yields were so low that most ordinary savers ignored them.
As the Federal Reserve held rates high to fight inflation, muni yields rose with everything else, and many long-term issues now pay meaningfully more than they did in the 2010s.
Muni interest is generally exempt from federal income tax, and often from state tax too if you buy bonds from your own state.
For someone in the 24% or 32% bracket, a tax-free 4% can feel closer to a 5.5% or 6% taxable return.
In a world where a high-yield savings account pays roughly 4% and gets taxed, that math gets people's attention.
They trade like stocks, which means their prices move when interest rates move.
If you buy a 20-year bond and rates climb, the bond's resale value drops.
If you need your money before maturity, you can lose principal.
That's the risk nobody mentions when they say "tax-free income." There's also credit risk.
Puerto Rico's debt crisis and Detroit's 2013 bankruptcy are reminders that "muni" does not mean "guaranteed." Most bonds are rated, but ratings are opinions, not promises.
A bond insurer's backing only matters if the insurer stays solvent.
Then there's the hidden trap: the call feature.
Many munis can be redeemed early by the issuer when rates fall, which means you get your money back right when you'd rather keep collecting that higher coupon.
You took the duration risk; the issuer took the upside.
Read the offering documents, or you'll learn this the hard way.
So how do regular people actually buy these?
You can go through a broker, but individual munis often trade in $5,000 increments and the markup can be brutal.
For most households, a low-cost muni bond mutual fund or ETF is the practical route.
You give up the ability to pick your own maturities, but you get instant diversification and daily liquidity.
One more thing worth knowing: munis are not just for the wealthy anymore.
Some brokers now offer fractional shares of muni ETFs, and Treasury money market funds have gotten competitive enough that the gap isn't always worth the complexity.
A taxable bond yielding 5% can beat a tax-free 4% if you're in a low bracket.
For two years, Americans have watched prices rise and felt like the system was rigged against them.
Muni bonds aren't a cure for that, and they aren't risk-free.
But they are one of the few places where the same rate hikes that made your credit card and car loan more expensive actually worked in a saver's favor.
If you've been parking everything in a checking account earning 0.01%, that's the real emergency. **The takeaway:** Tax-free income sounds like a gift, but it comes with price swings, credit risk, and fine print that can bite.
Treat munis as one tool in a diversified plan, not a magic fix.
Final Thoughts
If the numbers don't clearly beat what you'd earn after tax elsewhere, the complexity isn't worth it.