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✎ In this video, we’re going to learn about investing in a tax-efficient manner. Leave your thoughts or questions in the comments below. Have fun!
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Tax Efficient Investment Strategy: Buy REIT ETF Inside Roth IRA
When it comes to investing, it’s important to consider tax efficiency as part of your overall strategy. One tax efficient investment approach is to buy Real Estate Investment Trust (REIT) ETFs inside a Roth IRA account.
A Roth IRA (Individual retirement account) is a type of retirement account that allows you to contribute after-tax income, meaning you won’t be taxed on the money when you withdraw it in retirement. This makes it an excellent vehicle for tax efficient investments, such as REIT ETFs.
Here’s why buying REIT ETFs inside a Roth IRA can be a smart move:
Tax-free growth: One of the main advantages of investing in a Roth IRA is that any gains generated from your investments grow tax-free. By buying REIT ETFs inside a Roth IRA, you can take advantage of this tax benefit. REITs are companies that own, operate, or finance income-generating real estate properties. They often offer attractive dividend yields, providing you with potential income in the form of regular distributions. By holding these investments in a Roth IRA, you can reinvest these dividends tax-free, allowing your investment to compound over time without any tax implications.
No taxes on capital gains: When you invest in REITs outside of a retirement account, any capital gains you make will be subject to taxes. However, by holding REIT ETFs in a Roth IRA, you won’t have to worry about paying taxes on your capital gains. This can help you save a significant amount of money over the long term, especially if your investments experience substantial growth.
Diversification and risk mitigation: Investing in REIT ETFs allows you to diversify your portfolio by gaining exposure to a broad range of real estate properties and companies. This diversification can be beneficial for risk mitigation, as it helps to reduce the impact of any individual investment’s performance on your overall portfolio. By buying REIT ETFs inside a Roth IRA, you can achieve this diversification while taking advantage of the tax benefits it offers.
Flexibility in withdrawals: While a Roth IRA is primarily designed for retirement savings, it also offers flexibility when it comes to withdrawals. Unlike a traditional IRA, a Roth IRA allows you to withdraw contributions (not earnings) at any time and for any reason without incurring taxes or penalties. However, it’s important to keep in mind that early withdrawals of earnings may be subject to taxes and penalties. By investing in REIT ETFs inside a Roth IRA, you have the flexibility to access your contributions if needed while still benefiting from the potential tax-free growth and tax-free withdrawals of your earnings in retirement.
In conclusion, a tax efficient investment strategy involves buying REIT ETFs inside a Roth IRA. By taking advantage of the tax benefits offered by a Roth IRA, you can position yourself for tax-free growth and potentially save money on capital gains taxes. Additionally, investing in REITs allows for diversification and offers the potential for regular income through dividends. If you’re looking to maximize your investment returns while minimizing your tax liability, consider incorporating this strategy into your overall investment plan.
Thank you for the info. I have a question…since anything grown in roth IRA(as far as my knowledge goes) is for retirement and can’t be touched would it make much sense to invest in REIT inside and outside of the Roth if you are wanting money to grow that you can be more flexible with other than just retirement? Thank you in advance
if you put reit in a rot ira can you still take out the money without paying for taxes? i dont want to pay high taxes but at the same time i want to use that money when it comes.
Can this be applied to a sep ira
This is assuming you qualify for a Roth IRA. Any way to get the tax efficiency if you find yourself over the income limit?
A roth IRA is limited to $5500 a year. If I have $1000 in divided for the year from the RIET. Does that mean I can only add $4500 that year.
Curious, does it cost me more money to have someone prep my tax return if I have a REIT in my portfolio? How so, and why?
VNQ is nice because it's an ETF, so there's diversity and risk mitigation built into that, but the dividends it puts out are less than 3.7%/year and the stock doesn't appreciate much. You can get much better returns with AT&T (T), Verizon (VZ), BP (BP), and other utility companies. However, these are typically classified as qualified dividends and aren't taxed as high as REITs are. The dividends that are spun off from REITs are classified as ordinary dividends (and are taxed as ordinary income) so by putting it in a ROTH IRA, you benefit by avoiding the tax hit altogether which is nice.
Still, I think a good portfolio should not be heavily focused on REITS and instead focus more on the SPY ETF as it has historically done extremely well and is praised by investors like Warren Buffet.
Gold. Thank you bro.
Thank you for educating us on this! Great vid
You do not have to pay taxes only until you want to take your money out from the IRA. When you want your money is then when you have to pay. Right?