REIT, TIPS, and bonds

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Ependytis
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REIT, TIPS, and bonds

Post by Ependytis »

In retirement, under what circumstances would you buy REIT, TIPS, or bonds in a taxable account to rebalance your portfolio?
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Agitated_Analyst
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Re: REIT, TIPS, and bonds

Post by Agitated_Analyst »

Only if I couldn't maintain the desired asset allocation for my entire portfolio without doing so. I might THINK about reducing my REIT allocation, but I would keep my desired fixed income allocation the same. I wouldn't let the taxes change my desired risk profile.
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beyou
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Re: REIT, TIPS, and bonds

Post by beyou »

Your question implies people practicing asset location, and assumes you prefer to own those asset classes.

I dont think your purpose was to discuss the merits of these asset classes, so no comment there.

Some who do NOT practice asset location, and keep same asset allocation in each account would potentially own those in taxable. When rates were super low for over a decade, asset location was less useful. Today it seems useful once again with higher bond rates and inflation impacting TIPS cashflow.

If you do practice asset location, as I do, and if you are lucky enough to have a much larger taxable than tax deferred account, then you could end up owning anything in your largest and taxable account.

Personally I own muni bonds in taxable, since my bond allocation is larger than my tax deferred account, where I own taxable bonds (mainly TIPS). When TIPS went way up in total yield (with inflation adjustments) the income became too high to keep in taxable IMO, so I keep them in tax deferred.

REITs today are not as bad for a taxable account as they once were, discussed on other threads, but still less favorable vs other equity investments. I never have owned them in taxable, I would consider them for a Roth IRA as the ideal location (growth potential in Roth but without the less favorably taxed dividend issue).

Now if one had no IRA at all, you certainly would want bonds including possibly tips, and where else could you place them ? But if you have t-IRA space, good for those taxable bonds like TIPS, and if you have Roth IRA, good for REIT among other aggressive assets, maybe high yield corporate bonds or other equities.

So this is why it’s called personal finance, it is personal to your situation (tax brackets and balances in each acct).
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watchnerd
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Re: REIT, TIPS, and bonds

Post by watchnerd »

Ependytis wrote: Sat Oct 12, 2024 8:30 am In retirement, under what circumstances would you buy REIT, TIPS, or bonds in a taxable account to rebalance your portfolio?
None.

TIPS are part of my LMP and don't get rebalanced.

REITS and IG bonds are port of my risk port and don't rebalanced, either.
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
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retiredjg
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Re: REIT, TIPS, and bonds

Post by retiredjg »

Ependytis wrote: Sat Oct 12, 2024 8:30 am In retirement, under what circumstances would you buy REIT, TIPS, or bonds in a taxable account to rebalance your portfolio?
I would not put REIT into taxable. REIT is one of the least attractive things to put there. I'd get rid of it instead (if I could not keep it in a tax-advantaged account).

If I had to put bonds into taxable, it would probably be treasury bonds for lower yield and no state taxes. In a higher tax bracket, a muni bond fund might be more appropriate.

I am not familiar enough with TIPs to have an opinion, but I think I recall that Christine Benz didn't think it was a great idea.

These answers apply to my portfolio, since that is what you asked. In your situation, it might be worth it to do things I would not do.
Enolacs
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Re: REIT, TIPS, and bonds

Post by Enolacs »

Ependytis wrote: Sat Oct 12, 2024 8:30 am In retirement, under what circumstances would you buy REIT, TIPS, or bonds in a taxable account to rebalance your portfolio?
Never.
JohnDoh
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Re: REIT, TIPS, and bonds

Post by JohnDoh »

Savings bonds are an option. I bonds for TIPS especially. Given the purchase limits and the amount one has generated from rebalancing, they may or may not be a useful option. OTOH, every little bit helps and if one is two (a couple), has a trust (or two), a business (or two), it is possible to invest a decent amount in a given year and decrease size of taxable account(s).

Doing this now at the end of 2024 would enable a second bite at the apple in a few months.
Topic Author
Ependytis
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Re: REIT, TIPS, and bonds

Post by Ependytis »

If I over buy municipal bonds in my taxable account, I won’t have to pay taxes. I then could sell excess bonds in my tax defered account and buy TIPs. Makes sense. Thx.
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dogagility
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Re: REIT, TIPS, and bonds

Post by dogagility »

Ependytis wrote: Sat Oct 12, 2024 8:30 am In retirement, under what circumstances would you buy REIT, TIPS, or bonds in a taxable account to rebalance your portfolio?
I would not buy REIT fund... taxable or not.

I would purchase TIPS in a taxable account if I had a desire to reduce overall portfolio volatility, build a TIPS ladder and/or have increased protection against unexpected inflation.
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Topic Author
Ependytis
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Re: REIT, TIPS, and bonds

Post by Ependytis »

Thanks for the input.
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