Expert: Doug Ingram - 5/18/2007

Question
I'm working but at retirement age.  I know nothing about investing in tax free bonds but was encouraged to look into it.  Is there usually a minimum investment and then what can I expect on my return?  Are there any taxes at all to pay?
Thanks.

Answer
Most tax-free bonds are truly tax free.  If you buy some from another state, you may have some state tax to pay (but not on the in-state issues).
Yields are between 4 to 5% but can be more if you take a little risk (slightly lower rated issues).
The tax-equivalent yield should far exceed other options.
Minimum sizes are $5,000 blocks.  However, ticket charges work out better as you buy bigger size.  You can diversify $100,000 into 10 to 20 names and maturities to spread out reinvestment risk and other factors.
You may have some alternative tax issues, but those are for your accountant.