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When investing in REITs there are tax advantages in putting the investment in a retirement account. Is it better to put a REITs in a Traditional IRA or a Roth IRA considering overall growth and tax implications?

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    If you are young, it almost always pays to put investments in a ROTH. – Pete B. May 14 '14 at 13:47
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    @PeteBelford: What does age have to do with it? Only tax rate now vs. tax rate in the future matters. – user102008 May 14 '14 at 19:01
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    @PeteBelford It's capitalized like "Roth", not "ROTH". Not an acronym. Another pet peeve of mine, but not as high on my list as loan "principle". Forgive me: I've done copyediting in the past and am a stickler for these things. :) – Chris W. Rea May 14 '14 at 22:33
  • @ChrisW.Rea I have the same pet peeve. Named for the Senator from Delaware for 30 years, William Roth. – user662852 Jul 28 '15 at 2:24
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You should make the Traditional vs. Roth IRA decision before you think about which investments go in them. And before making that decision, make sure you can deduct Traditional IRA contributions by looking over the IRS guidelines. Basically, if you don't have a 401(k) or similar plan at work, or your income is low enough, you can deduct. If not, go with the Roth. If you could do either, the general rule is if you believe your income tax rate is higher now than it will be in retirement, use the Traditional IRA. If you believe your income tax rate will be higher in retirement than now (keeping in mind the possibility of future tax increases), use the Roth IRA. A rule of thumb, which I'm stealing from somebody, is if you're in the 15% federal bracket now, probably go with Roth, 28% go with Traditional, and 25% is a toss-up.

If you have cash sitting around in both a Traditional and Roth IRA and you are deciding which to invest in REITs with, that's a different question with a less clear-cut answer. This page seems to suggest that it's better to hold tax-inefficient investments like REITs in tax-deferred (i.e. Traditional IRA) over tax-free (i.e. Roth IRA) accounts, although I can't get a decisive answer on why that is, if it really is the case. They are probably about equivalent.

  • It is the latter, I have money in a traditional IRA (rollover) and a Roth IRA and can't decide where to put the REIT asset allocation. Also thanks for the page link -- – Abraham May 14 '14 at 17:28
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    I think the bogleheads article is not precisely relevant to the situation you spell out in your second paragraph: where you already have the cash sitting in the IRAs. If the cash is already in the Roth, then you've already paid taxes on it, so you should try to make as much taxable income as possible on it (because you never have to pay that tax). – dg99 May 15 '14 at 22:13
  • @dg99 What situation would the Bogleheads article be addressing then? – Craig W May 15 '14 at 23:26
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You should invest in BOTH --- reason is you can control your income when you retire. You take money out just enough from the standard IRA so you stay in the lowest tax bracket. Any additional money you need after that then comes out of the ROTH acct. You get the tax savings now and keep your taxes low when retired

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    +1 and a welcome to Money.SE. Any thoughts on how the REIT investment plays into this? – JTP - Apologise to Monica Oct 21 '18 at 23:12

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