REIT allocation

[USGrant1962]

What the difference is, is that you have to pay the tax for the year the dividend is paid from a REIT in a taxable account. In an tIRA you can choose when to distribute from the account unless subject to RMDs.

Gotcha. I've always treated REITs like bonds because of the ordinary tax rates, but was wondering if QBI changed the math. As is Golden Sunsets.

 

[audreyh1]

Well, basically only 80% of your REIT income is currently taxed, so sure it changes the math a little. In taxable accounts they are now more tax efficient than bonds.

 

[audreyh1]

I made a plan a few years ago for portfolio simplification, looking at which asset classes I’d want in my portfolio in my 80s. With the idea to gradually get there. At that time I decided to eventually get rid of the REIT allocation.

During the sell off this year I exchanged my REIT fund for more broadly diversified index funds.

I still get REIT dividends from my index funds.

 

[target2019]

In my Roth-IRA I hold VGSLX Vanguard REIT Index Fund Admiral Shares. AA is sitting at 4.5%, and my target is 5.0%.

In taxable I use Realty Income (O) and HTA.

I can hang in there with these investments. They will come back and outperform someday.

Would those not be better in tax favored account?

Vanguard VGSLX is in a tax-free account. The allocation is significant, but not crazy.

O and HTA were inherited. The allocation is very small, and we continue with them to provide a bit more income in the brokerage. In the 12% Fed Tax Bracket it's a very small tax hit. When the gain drifts down a bit more they might get sold.