Long-term bond funds recently were yielding a solid if not sensational 4.5 percent,
according to Morningstar, Inc., Chicago. However, if you hold such funds in a taxable
account, rather than in a tax-deferred retirement plan, the yield will pared by income
tax. In a 28 percent bracket, for example (taxable income over $70,350 on a joint
return in 2004), a 4.5 percent yield would shrink to a mere 3.24 percent.
Higher-bracket taxpayers would net even less, after-tax.
As a solution, you might consider municipal bond funds, which hold tax-exempt bonds
issued by state and local government bodies. The interest on these bonds generally
won
