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Do REITs Belong in a Retirement Portfolio?

Retirees love dividend income, and real estate investment trusts have great yields in today's low-rate environment. But do REITs fit well in an IRA or other retirement account?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at REITs and whether they belong in retirement accounts. Dan notes that many investors get confused about income investments in IRAs, noting that master limited partnerships like Kinder Morgan Energy Partners (NYSE: KMP  ) can produce unrelated business taxable income that can threaten the tax-exempt status of your IRA. By contrast, though, Dan notes that REITs generally don't produce that kind of income. Moreover, with REITs like Annaly Capital (NYSE: NLY  ) and American Capital Agency (NASDAQ: AGNC  ) , sheltering dividend income within an IRA is especially valuable, because those payouts generally don't qualify for lower tax rates on certain dividends. Dan concludes that REITs can definitely be part of a smart retirement portfolio.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

10/22/2014 3:59 PM
AGNC $22.96 Up +0.12 +0.53%
American Capital A… CAPS Rating: ****
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Kinder Morgan Ener… CAPS Rating: *****
NLY $11.33 Up +0.02 +0.18%
Annaly Capital Man… CAPS Rating: ****

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