LETTERS to the Editor.Could REITs Boost Retirement Income? Thornton Parker's concept of buying and selling cycles producing phantom wealth ("The Coming Retirement Crisis," March/April 2001), particularly when there is no income stream from dividends, makes sense. My idea is that if part of the Social Security funds is to be invested, why not invest in REITs [real estate investment trusts]? By law, there is a guarantee of some dividend payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. by REITs, thus assuring an income stream. Plus, the real estate value in REITs -- which, like stocks, are cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. -- can produce capital appreciation. It would seem that this would not be "phantom" wealth, and would provide better returns, over time, on our Social Security funds. I would like to have Mr. Parker comment on this, if possible. Simon A. Sayre, M.D. Ojai, Calif. Thornton Parker replies: I am not an investment advisor Investment Advisor 1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and , but I agree with Dr. Sayre that REITs are good examples of the types of investments that are needed for retirement accounts. They raise capital and use it to make productive investments that create homes, workplaces and jobs. Some of them have royalty provisions in their leases that allow business tenants to have low rents and share their proceeds, if successful. REITs pay significant dividends on the basis of their actual accomplishments, not future hopes, and their preferred stocks Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. can he particularly good investments unless they have low investment ratings or call prices. REITs also have disadvantages. The [real estate] industry is cyclical, and has unusual risks. Some REITs cannibalize can·ni·bal·ize v. can·ni·bal·ized, can·ni·bal·iz·ing, can·ni·bal·iz·es v.tr. 1. To remove serviceable parts from (damaged airplanes, for example) for use in the repair of other equipment of the same each other, as occurs when shopping centers shopping center, a concentration of retail, service, and entertainment enterprises designed to serve the surrounding region. The modern shopping center differs from its antecedents—bazaars and marketplaces—in that the shops are usually amalgamated into "leap-frog" each other, and many of them engage in land speculation. When traders Traders Individuals who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do this, their objective is to earn the bid/ask spread. play REITs like other speculative stocks Speculative Stock A stock with extremely high risk relative to potential return. Notes: Speculative stocks often have a high probability of declining in value and a low probability of experiencing above average gains. , they shift attention from long-term accomplishments and dividends to short-term price fluctuations. There are relatively few REITs with top investment ratings, and Social Security purchases could dominate those particular stocks. I think it is a mistake to view money that is paid into Social Security as anything other than a current expense intended to go directly to beneficiaries. The program's creators needed an over/under adjustment account because it is impossible to budget tax receipts and benefit payments accurately. When they called it the "trust fund" to keep it distinct from other government accounts, as well as for technical reasons, they never anticipated that the term would come to mean what it does today. The program should be continued as it was created -- primarily as a pass-through safely net for those who have little else. It would be a mistake to try to make it into an investment-based hammock hammock, suspended bed, usually of netting, canvas, or leather. The hammock and its name were introduced to Europeans by Christopher Columbus, who learned of them from Native Americans. for everybody to enjoy for years. Thornton Parker is the author of What If Boomers Can't Retire? How to Build Security, Not Phantom Wealth (Barrett-Koehler). The article in Financial Executive was based on his book. Financial Executive welcomes letters, which may be edited for style or clarity. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion