How to Access Your Social Security Exempt Bond Fund

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A bond fund is a "package" of bonds that share a common trait, such as being long-term bonds or short-term bonds, federal bonds or municipal bonds. Bond funds are offered through brokerage houses, such as Vanguard, Fidelity, Charles Schwab or E-Trade. Almost any entity that sells mutual funds will also sell bond funds.

Municipal bonds, or bonds issued by a city, are exempt from federal taxes, including Social Security taxes. You do have to pay state income taxes, and the alternative minimum tax if applicable.

Contact the brokerage that is holding your bond fund, either by phone or online through your individual login name and password. Tell the person on the phone that you want to access your tax-advantaged bond fund, or go to the webpage that allows you to access your funds.

Buy, sell or exchange bond fund shares. Do whatever it is that you want to do now that you've accessed the funds.

Set up a transfer between the brokerage and your bank. To do so, you will need to provide the brokerage house with your bank's routing number and your account number. If your goal is to access the money within the bond funds, you will need to sell the funds and transfer the cash to a checking account.

Report the sale of the bond fund, if applicable, on IRS Form 1099-INT, where you will report all interest income. You will not need to pay normal federal taxes, but the sale will be subject to state tax and AMT, or alternative minimum tax.

Warnings

  • Investing in bonds exposes your money to risk, including risk of principal loss. Always consult with a professional tax advisor before buying or selling bonds, and when filing taxes. All bonds are subject to interest-rate risk.

References

About the Author

Kennedi Rose is an Atlanta-based journalist who began her career in 2005 as a newspaper reporter covering the education beat. She has written for a wide variety of commercial, trade and online magazines covering food, drink and the retail sector. She holds a Bachelor of Arts in sociology.

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