Retirees’ Income Secret: Listed REITs

Wilshire Investment Management headquarters in Santa Monica, CA.

WASHINGTON, DC—“The income-oriented portfolio provides slightly less annual total return, but a greater income return,’ according to a new study conducted by Santa Monica, CA-based Wilshire Funds Management and sponsored by NAREIT. “For many retirees this may be the appropriate trade-off.” Furthermore, the study says, adding REITs to a retirement portfolio is “critical to achieving the goal of generating a stable income with a reasonable level of risk tolerance.”

Using 40 years of investment return data through 2015, the study shows that adding a range of high income-generating assets—including REITs as well as preferred stocks and other vehicles—to a traditional retirement-stage portfolio could boost income returns by nearly 40%, while providing comparable total returns and no increase in risk. The research is based on a variation of the Mean-Variance Optimization method for portfolio modeling, incorporating a requirement for a specified level of income return.