Muni-Ladder Interest Rate Scenario Tool

The information presented in the scenario tool is for illustrative purposes only and does not reflect the performance of any specific Lord Abbett product or service. These materials are not intended to be an offer or solicitation with the respect to the purchase or sale of any security or other financial instrument or any investment management services. It does not constitute a recommendation nor investment advice and should not be used as the basis for any investment decision. Separately managed accounts may not be suitable for all investors. This is not a representation of any securities Lord Abbett purchased or would have purchased or that an investment in any securities of such issuers would be profitable.

Yields, estimated income, and estimated returns shown do not reflect the effect of fees imposed by an investment manager nor does it reflect the impact of taxes. Fees and taxes will reduce the value of a client’s portfolio.

The simulations presented do not represent the results that any particular investor actually attained. The information presented is based, in part, on hypothetical assumptions entered by the user. No representation or warranty is made as to the reasonableness of the assumptions made or that all the assumptions used in achieving the returns have been stated or fully considered. Simulated results have many inherent limitations and no representation is made that any account will or is likely to profit similar to those shown in the scenarios. Actual performance results may differ, and may differ substantially, from the simulations. Changes in the assumptions may have a material impact on the hypothetical results presented.

The information presented in this scenario tool is intended for general information and may not apply to your tax situation. It is not intended to be relied upon and should not be relied upon, as financial, legal or tax advice for any particular investor. We strongly recommend that you contact your financial, legal or tax advisor regarding your particular tax situation.

You bear sole responsibility for any decisions you make based on the output of this calculator. The calculator makes certain assumptions that may not apply to you. The calculator has many inherent limitations and individual results may vary. The use of tools cannot guarantee performance. Any references to future returns should not be construed as an estimate of the results a client portfolio may achieve.

The information presented in this section is not written or intended to be used, and cannot be used, for the purpose of avoiding any tax liabilities or penalties.

Definitions
Tax-Free Yield At Inception - The average coupon of the selected ladder portfolio assuming bonds are purchased at par, coupon is equal to yield, and an equal dollar value is invested in each rung of the ladder.

Tax-Equivalent Yield At Inception - The yield a taxable bond needs to produce in order to provide you with the same after tax income as the Tax Free Yield at Inception.

Taxable Income - Your annual earnings less allowable tax deductions, exemptions and various other adjustments.

Tax Filing Status - Additional filing status available to taxpayers such as Head of Household and Married Filing Separately are outside the scope of this tool.

* Tax Summary
The displayed rates are the Federal tax rates effective for 2018 and state and local tax rates effective for 2017 and have been rounded to the nearest hundredth of a percent. Rates are sourced from www.bna.com. The Top Tax Rate on Investment Income may not add up to the displayed rates due to rounding.

Federal - The highest marginal tax rate is used. The effective tax rate that accounts for the progressive nature of the tax rate table is not factored in and will be lower than the highest marginal rate.  Other taxes such as the Alternative Minimum Tax, Medicare Tax Surcharge and Self Employment Tax cannot be accurately computed based solely on taxable income and are therefore ignored. It is possible that these additional taxes could impact your marginal tax rate.  Additionallly, due to the limitation on state and local taxes, any deduction for state and local taxes paid is ignored.

State - The highest marginal state tax rate is used. The effective tax rate that accounts for the progressive nature of the tax rate table is not factored in and will be lower than the highest marginal rate. If you choose NYC, the combined New York State and NYC rate is used. Certain state and local jurisdictions levy an income tax even though they are not shown as a choice in this calculator. If you reside in such jurisdictions, your marginal tax rate may be higher than what is displayed.

Health Care - The Net Investment Income Tax, also referred to as the Heath Care tax, is applicable to investment income earned by certain high earning  taxpayers.

Top Tax Rate on Investment Income - The sum of the federal income tax, state income tax, and health care tax.

Scenario Assumptions: All returns and yields are gross of fees and taxes. The hypothetical laddered portfolio is defined by user inputs in the tool above where an equal investment is allocated to each maturity from “x” to “y” years. The length of the ladder “x” to “y” is determined by the “Ladder Range” input. As the first year bond matures or rolls down outside the specified ladder range and needs to be sold, additional bonds are purchased on the furthest rung of the ladder. It is assumed that bonds are purchased at par where the coupon equals the yield. "Income" refers to coupon income and does not include gains or losses on the sale of bonds. Yield curves are calculated using a 70% allocation to Mid YTM US Revenue AA Muni BVAL Yield Curve and a 30% allocation to Mid YTM US General Obligation AA Muni BVAL Yield Curve, which are sourced from Bloomberg and are as of {{AS_OF_DATE}}.  All bonds are assumed to be non-callable and to make payments on a semi-annual basis at the end of the period. Gains and losses, both realized and unrealized, are included in the estimated returns. Income is distributed annually and is not reinvested.  Increases in interest rates are evenly distributed over the user defined number of years (e.g. 1% rise in rates over 4 years is 0.25% increase each year for the next 4 years).  Thereafter, the interest rates remain flat. The coupon rates of bonds do not change throughout their lives.  Bond prices are estimated using a present value calculation.

Risks to Consider: All investments carry a certain degree of risk, including loss of principal. The value of an investment in bonds will change as interest rates fluctuate in response to market movements. When interest rates rise, the prices of debt securities tend to decline, and when interest rates fall, the prices of debt securities tend to rise. High-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. A bond issued as tax-exempt may be reclassified by the IRS as taxable, creating taxable rather than tax-exempt income. In addition, bonds are subject to other risks, such as call, credit, interest-rate, liquidity, and general market risks. Income derived from a tax-free fund’s portfolio may be subject to the alternative minimum tax (AMT), and any capital gains realized may be subject to taxation; in addition, state and local taxes may apply, based on state of residence. Diversification does not insure against market loss. There is no assurance that an investment will provide positive performance over any period of time.