REITs for Income and Diversification

Posted on 8-21-2019

Real estate investment trusts (REITs) can offer a consistent income stream and help provide portfolio diversification. Considering these potential benefits, it may not be surprising that an estimated 80 million Americans own REITs in their retirement accounts and other investment funds.

Of course, like all investments, REITs also have risks and downsides.

This week, Craig Siminski, of CMS Retirement Income Planning, offers some helpful information as you consider whether or not a REIT is RIGHT for you:

An equity REIT — the most common type of REIT — is a company that uses the combined capital of a large number of investors to buy and manage residential, commercial, and industrial income properties.

A REIT may focus on a specific type of property, but REIT properties in general might range from shopping malls, apartment buildings, and medical facilities to self-storage facilities, hotels, cell towers, and timberlands. Equity REITs derive most of their income from rents.

Under the federal tax code, a qualified REIT must pay at least 90% of its taxable income each year in the form of shareholder distributions.

Unlike many companies, REITs generally do not retain earnings, so they may provide higher distribution percentages than some other investments. At the end of Q1 2019, equity REITs paid an average distribution of …

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 21 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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