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Holding high-yield dividend stocks outside a Roth IRA can cost investors over $12,000 annually in taxes.

Market News
28 Aug 2026
24/7 Wall Street
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Bearish
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Investors holding high-yield dividend stocks like mortgage REITs and BDCs outside a Roth IRA face significant tax penalties, as these dividends are taxed as ordinary income. A $500,000 portfolio in these stocks can lose about $12,720 annually in taxes at a 24% bracket, with the tax cost compounding over time to over $127,000 in 10 years. The article advises moving such stocks into Roth accounts to avoid these taxes and maximize tax-free growth, especially for high-yield names like AGNC, NLY, ARCC, MFIC, and O. Investors should consider phased Roth conversions starting with the highest-yielding stocks to reduce tax drag.

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