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From Coast to Coast: How U.S. Muni Bonds Help Build the Nation

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Municipal Bonds Infographic

History of Municipal Bonds

This infographic is available as a poster.

Over 200 Years of U.S. Municipal Bond History

Our modern society shares few characteristics with the 1800s. In the last two centuries, styles have changed, laws have evolved, and cities look entirely different. However, one thing that has prevailed is the way state and local governments finance public projects.

Far from a new invention, municipal bonds have been shaping U.S. communities for more than 200 years. In today’s infographic from New York Life Investments, we take a look back at their long history.

Early Beginnings – 1800s

1812: First Official Issue
New York City issues a general obligation bond for a canal.

1817-1825: Facilitating Economic Growth
A few years later, 42 separate bond issues help fund the successful Erie Canal project.

1843: Growing Popularity
Municipal debt sits at about $25 million. Over the next two decades, this total increases exponentially to fund urban improvement and free public education.

Circa 1865: Railroad Expansion
For a few years after the American Civil War, a great deal of debt is issued to build railroads.

1873: The Panic of 1873
Excessive investment in railroads, real estate, and nonessential services leads to the downfall of the large bank Jay Cooke and Co., smaller firms, and the stock market. Many state and local governments default, temporarily halting municipal financing.

The 20th Century

1913: Exception Granted
U.S. Congress introduces a permanent federal income tax, and specifically excludes municipal bond income from taxation.
Note: today, a portion of municipal bonds are taxable.

1930: Expansion in the West
In the midst of the Great Depression, voters approve $35 million in funding to build the Golden Gate Bridge.

1939-1945: Diverted Resources
With financial resources directed to the military in WWII, municipal debt falls. By 1945, total debt sits at less than $20 billion.

1960: Exponential Growth
Only 25 years later, outstanding public debt—the total amount owed to creditors—more than triples to $66 billion.

1971: Investor Protection
Municipal bond insurance is introduced. That same year, insured municipal bonds finance the construction of hospital facilities in Alaska—bringing essential services and investment opportunities to a remote area.

1975: Marketplace Stewardship
Bringing further reassurance to the municipal bond market, the Municipal Securities Rulemaking Board (MSRB) is introduced to establish regulations for dealers, and for advisors at a later date.

1981: Continued Growth
Outstanding public debt reaches $361 billion.

Modern Day

2009-2010: Economic Recovery
More than $181 billion of federally-subsidized Build America Bonds are issued by state and local governments to help stimulate the economy after the financial crisis.

2016-2018: Investor Dollars at Work
In recent years, state and local debt has financed many important projects across the country.

  • 2016: The New York State Thruway Authority issues $850 million in bonds to finance a portion of the new NY Bridge Project.
  • 2017: California’s Department of Water Resources issues $428 million in bonds for the maintenance and construction of its water management infrastructure.
  • 2018: The Denver International Airport issues $2.5B in bonds to finance capital improvements, the largest airport revenue bond in municipal bond history.

2018: Helping People and the Planet
Sustainable applications for municipal bonds continue to grow, with Californian voters approving $2 billion in financing for supportive housing. In addition, state and local governments issue $4.9 billion in U.S. municipal green bonds.

Today: A Sizable Investment Opportunity
As financing spans the nation, the U.S. municipal bond market is both large and active:

  • $3.8 trillion capital market
  • One million outstanding securities
  • $11.6 billion in par traded per/day
  • 40,000 daily trades

Not only that, municipals have offered a compelling after-tax yield. For example, high yield municipals offered 121% of the after-tax yield of high yield corporates as of September 30, 2019.

The Foundation of Infrastructure

For over 200 years, municipal bonds have provided critical financing to build hospitals, schools, highways, airports, and more. Today, two out of three infrastructure projects in the U.S. are financed by municipal bonds.

Additionally, municipals have weathered almost every economic storm, providing much-needed capital stimulus during some of the deepest U.S. recessions. As history continues to unfold, municipals hold great potential for issuers, communities, and investors.

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Infographics

The Top 6 Infrastructure Investment Opportunities

Based on funding from the Infrastructure Investment and Jobs Act, this graphic explores the top 6 infrastructure investment opportunities.

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Infrastructure Investment

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The Top 6 Infrastructure Investment Opportunities

The U.S. government is putting a focus on infrastructure investment. For years, the country’s infrastructure—critical structures and facilities like roads, power supplies, and internet access—has been in poor condition.

Now, the government is pledging billions of dollars in funding. In this graphic from New York Life Investments, we explore how this public commitment translates into six potential infrastructure investment opportunities.

Breaking Down the Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act was signed into law in November 2021. It includes nearly $550 billion in new investments.

CategoryInvestment Amount
Transportation$283.8B
Broadband$65.0B
Energy & Power$65.0B
Water$63.3B
Climate & Cybersecurity Resiliency$47.2B
Environmental Remediation$21.0B

Based on these commitments, here are the six categories that present potential infrastructure investment opportunities.

1. Transportation

52.0% of new government funding

Because infrastructure has been underfunded for some time, transportation systems are in a state of disrepair.

  • 43% of roads are in poor or mediocre condition
  • 231,000 of the country’s 617,000 bridges are in need of repair or preservation work

New government funding will enable the expansion and repair of transportation infrastructure.

The infrastructure investment opportunity: Funding could increase revenue and provide stable long-term contracts to engineering, materials, and construction companies.

2. Broadband

11.9% of new government funding

Millions of Americans don’t have access to broadband (high speed) internet, and the number of people who don’t use it is even higher due to affordability issues.

  • People without access: 14.5 million
  • People who don’t use broadband: 120.4 million

New government funding will increase access and help reduce prices.

The infrastructure investment opportunity: Funding could boost the customer base and revenue of internet service providers.

3. Energy & Power

11.9% of new government funding

The U.S. has set a goal to have net zero emissions by 2050, yet the country gets most of its energy with fossil fuels.

SourcePercent of U.S. Energy Consumption in 2020
Petroleum34.7%
Natural Gas 34.0%
Renewables12.5%
Coal9.9%
Nuclear8.9%

New government funding will help build electric power transmission lines and facilitate clean energy technology.

The infrastructure investment opportunity: Funding could boost the revenue of utility, manufacturing, and renewable energy companies.

4. Water

11.6% of new government funding

U.S. water infrastructure is aging, with 14-18% of potable water lost through leaks. The annual costs of wasting this treated water is projected to increase from $7.6 billion in 2019 to $16.7 billion in 2039.

New government funding will modernize water infrastructure, invest in water storage and recycling, and remove lead pipes.

The infrastructure investment opportunity: Funding could boost the revenue of engineering firms and companies that build, install, and repair water pipes.

5. Climate & Cybersecurity Resiliency

8.7% of new government funding

Climate disasters and cyber attacks are leading to increased costs & destruction of infrastructure. In 2020, there were 22 U.S. climate disasters that each cost over $1 billion in damage—with a total cost of $100 billion.

Type of DisasterCost in 2020
Tropical Cyclone$57.5B
Severe Storm$35.5B
Wildfire$17.3B
Drought$4.7B

New government funding will invest in protection against cyber attacks, floods, droughts, and other climate disasters.

The infrastructure investment opportunity: Funding could boost the revenue of companies involved in cybersecurity, weatherization, environmental consultation, and construction.

6. Environmental Remediation

3.9% of new government funding

Contaminated sites are causing environmental harm or hindering land reuse, and there are more than 450,000 of them across the country. New government funding will clean up contaminated land, reclaim abandoned land mines, and plug orphaned oil and gas wells.

The infrastructure investment opportunity: Funding could boost the revenue and long-term contracts of environmental remediation companies.

Public Funding, Private Infrastructure Investment Opportunities

A boost in government funding is likely to create increased activity in private infrastructure-related areas:

  • Engineering
  • Construction
  • Materials
  • Internet Service Providers
  • Clean Energy Tech
  • Pipe Installation
  • Cybersecurity
  • Environmental Consultation

By paying attention to where the money is going, investors can consider a variety of categories that provide critical services—and capitalize on upcoming trends.

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Infographics

What Retirement Barriers do Americans Face Today?

Retirement barriers are making it difficult for people to feel good about their future. See how advisors can help in this infographic.

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What Retirement Barriers do Americans Face Today?

Today’s definition of retirement is much different than before.

It’s no longer a postscript to career, but instead a time to enjoy freedom. This could be the freedom to learn new hobbies, the freedom to travel, or the freedom to start an online business. Unfortunately, this freedom is proving to be difficult to achieve for most.

In this infographic from New York Life Investments, we discuss the retirement gap—what it is, why it exists, and how advisors can help reduce it.

What is the Retirement Gap?

New York Life Investments partnered with AARP to survey over 3,000 Americans about their retirement plans. They uncovered that across all ages, there was a gap between i) people’s perceived importance of retirement planning, and ii) their actual preparedness.

Age groupPerceived importance of preparing for retirementActual preparedness
20s77%45%
30s87%41%
40s87%40%
50s92%47%
60s93%58%
70-7484%70%

Based on a survey of 3,025 Americans aged 20-74.

These results suggest that the status quo around retirement planning isn’t working for most people. This is further supported by other survey findings. For example, 65% of respondents said they didn’t feel optimistic about retirement.

What Barriers do Americans Face?

The survey determined that Americans are struggling to overcome five retirement barriers. Let’s hear from survey respondents to learn more about them.

#1: Managing multiple priorities

Juggling between retirement savings and more immediate needs such as childcare can lead to emotional overwhelm.

”It’s difficult to put substantial money in a 401 or IRA while also paying off debt at the same time.”
– Alex B. (20s)

#2: Figuring out how much is enough

Uncertainty about how much savings is needed causes many people to avoid retirement planning altogether. The problem can simply feel too large to tackle.

”Retirement and aging are not things I look forward to, mainly because of the lack of preparation and fear of the unknown.”– Janet F. (50s)

#3: The complexity of resources

Many Americans find retirement resources are too difficult to understand. This issue is related to a lack of financial literacy, which happens to be a growing problem in the United States.

”They don’t break it down into where you can understand it.”– Amy E. (40s)

#4: Lack of representation in the marketplace

People feel that available resources are not speaking to them, or are not relevant to their life circumstances. This type of “alienation” can discourage people from seeking professional advice.

”I don’t see people who are anything like me. I see representations of upper management people…and I know that won’t be my reality.– Penni B. (60s)

#5: Don’t know who to trust

People feel that the financial industry does not have their best interests in mind. They often seek information from sources who seem more like “them.”

”I avoid professionals because I hear so many stories of financial planners who cheated people in their investments. I believe in some of the people I follow on YouTube more.”– Dino M. (50s)

Bridging the Gap

Altogether, these barriers highlight a disconnect between who the market is targeting, and who is most in need of help. Financially advisors have the power to bridge this gap by doing two things.

The first is to view investors as “customers for life”. Large firms often push advisors to work with clients who have a greater level of assets—typically those in their 40s or older. This could create a major challenge for younger generations who hope to one day retire.

For example, survey data shows that people’s expected retirement age increases as they grow older. This suggests that young adults are struggling to develop the right financial plan for their needs.

Age of respondentExpected retirement age
20s55.7
30s60.7
40s64.6
50s64.9
60s67.8

Based on a survey of 3,025 Americans aged 20-74.

By viewing investors as “customers for life”, advisors have the opportunity to steer people onto the right path at an earlier age. This can help them create positive impact in their communities, as well as grow their business through word-of-mouth marketing.

The second thing advisors can do is reach out to underserved communities. Data shows that Black and Hispanic Americans are less likely to have retirement savings, while those that do feel much less confident.

EthnicityHave retirement savingsPerceive retirement savings as being on track
White80%42%
Black63%23%
Hispanic58%22%
Asian85%47%

Source: Statista (2021)

Up to this point we’ve focused on the financial aspect of retirement, but what about health & wellness?

Redefining Retirement: Health, Wealth, and Self

The rising importance of personal health has been a major phenomenon of the COVID-19 pandemic. According to McKinsey, 48% of Americans increased their prioritization of wellness compared to 2-3 years ago.

This shift in thinking must also be reflected by retirement plans. One way to do this is to integrate health & wellness considerations alongside wealth.

For example, poor physical health can significantly drive up the costs of retirement. In fact, the average American aged 65-84 already spends nearly $17,000 per year on healthcare.

Mental health, on the other hand, can be severely affected by money-related stress. Symptoms include a loss of sleep, high blood pressure, and a negative impact on personal relationships.

Perhaps most interesting is that the relationship between health and wealth goes both ways. In other words, wealth can be a driver of better emotional and physical health. The following table shows how individuals with greater income felt better about their wellbeing.

Income levelConsider themselves to be emotionally healthyPhysically healthy
Under $40K50%47%
$40K - $75K63%56%
$75K - $100K68%63%
Over $100K73%68%

Based on a survey of 3,025 Americans aged 20-74.

To develop a more holistic retirement plan for their clients, advisors must transform from financially focused representatives to holistic life coaches.

Barriers are Meant to be Broken

With the concept of retirement, many Americans feel like they are on the outside looking in. They suffer from a lack of representation, a mistrust for the financial industry, and have few resources that are catered to them.

What’s needed is a democratization of retirement planning.

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