The old rule said REITs were the retiree’s easy button. Buy the trust, collect the fat dividend, let the rent checks land while you sleep. Some of them still throw off 4% to 6% yields, which beats what a lot of bonds are doing. But that map has a few cliffs drawn as flat road. REITs move like stocks, not like the building down the street. When rates climbed, a chunk of them got a kick to the teeth right when retirees wanted steady. And the dividend you were counting on? A REIT can cut it. Kiplinger walks through the whole thing here.
So the answer isn’t yes or no. It’s how much. A small slice can add income and spread you outside plain stocks and bonds. Load up on them expecting bond-like calm, and you’ll find out the hard way that a REIT is a stock wearing a landlord costume. Steady on the label. Not always steady in the account.
That fat REIT yield is doing two jobs at once, and the second one bites: a mortgage REIT paying 12% is often paying you back your own capital while the share price sinks. For a retiree living off dividends, that’s the difference between income and slow liquidation.
The move isn’t to skip REITs, it’s to sort them. A boring warehouse or apartment REIT throwing off 4% to 5% behaves very differently than the high-yield stuff, and knowing which one you own is the whole game.
The pitch on REITs was always “real estate income without being a landlord.” Then 2022 showed up, rates ran from near zero to over 5%, and the same funds that were supposed to be your steady paycheck dropped 25% in a year while your bond ladder was already bleeding. Turns out a high yield and low correlation are two different promises, and the ones sold as safe retirement income were quietly neither. So the retirees who treated a 6% REIT yield as a substitute for the pension nobody gives them anymore learned that the dividend can hold while the principal falls out from under it.
Sources: kiplinger.com
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