How to retire comfortably and sleep well at night? The answer lies in carefully planning your retirement portfolio. In this article, we will explore the key factors to consider when building your retirement fund and how Real Estate Investment Trusts (REITs) can play a crucial role in securing your financial future.
A Personalized Retirement Plan
Retirement planning is not a one-size-fits-all approach. Just as everyone's lifestyle and income differ, so will their retirement needs. It's essential to identify what you want and need in retirement to determine the amount of money required.
Factors to consider include your desired location, living expenses, debts (such as student loans and mortgages), and even the proximity of family members, especially grandchildren. Traveling, spoiling your grandkids, and daily expenses should all be taken into account.
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The Importance of Financial Considerations
While personal preferences shape retirement goals, financial aspects cannot be overlooked. Assessing your debts, including mortgages and credit card liabilities, is essential. Additionally, estimating your lifespan beyond retirement can help determine the required savings.
The conventional wisdom suggests having a nest egg of $1 million to $1.5 million, assuming a $50,000 annual expenditure over 20-30 years. However, life expectancy is increasing, and it's prudent to plan for an extended retirement period. Social Security benefits may provide some support, but depending solely on them is no longer viable.
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Building a Secure Retirement Portfolio with REITs
As more Americans seek ways to fund their retirement, REITs have emerged as an attractive option. Real Estate Investment Trusts not only help build a retirement portfolio but also provide stable income during retirement. They are required by law to distribute at least 90% of their taxable income to shareholders, making them reliable income generators in both bear and bull markets.
Historically, nearly three-fifths of total returns from REITs come from dividends. The Wilshire Funds Management Target Date Fund portfolio, commissioned by Nareit, found that including REITs increased returns and reduced risk. Over a 43-year investment period ending in 2018, a portfolio containing REITs yielded 19.2% higher value than one without.
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Seizing the Opportunity: Start Building Your REIT Portfolio
With an estimated 80 million Americans already owning REITs through retirement funds, now is the perfect time to consider investing. Depending on your investable funds, you can start building a solid retirement portfolio with REITs alone.
While investing in REIT ETFs is a viable option, it's important to note that they provide exposure to a broad range of REITs, including underperforming ones. Opting for a hand-picked portfolio of high-quality REITs can yield optimized results.
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Focus on Steady Dividend-Paying Opportunities
When selecting REITs for your portfolio, it's crucial to prioritize stability and dividend-paying ability. While every investment class has its ups and downs, investing in high-quality REITs with promising futures is key.
Careful analysis and selection are necessary to avoid underperforming sectors. Notably, the best-performing REITs have rebounded significantly, with the broader REIT index up over 26% in 2019.
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Crafting a Diversified, Quality-Oriented Portfolio
At iREIT on Alpha Marketplace, we offer four portfolios tailored to different risk profiles. These diversified portfolios have consistently delivered impressive results. For example, the Durable Income Portfolio, our largest and most diversified portfolio, has generated a return of 22.6% year-to-date.
Source: iREIT
Prioritizing Dividend Safety and Quality
Our Durable Income Portfolio focuses on SWANs (stocks that help you "sleep well at night"). These stocks are carefully screened based on their sustainable dividend growth and financial stability. By allocating a larger percentage of capital to SWANs, we prioritize dividend income generation and long-term sustainability.
Source: iREIT/Sharesight
Building a Resilient and Diversified Portfolio
To mitigate risk and optimize returns, we allocate capital across different sectors. Some sectors, such as technology-focused REITs, offer attractive growth potential, while others, like retail and lodging, may face challenges.
By carefully analyzing sectors and sub-sectors, we identify high-quality REITs with favorable growth prospects. This property-based approach allows us to optimize capital allocation and achieve a balanced, diversified portfolio.
Source: iREIT/Sharesight
A Secure Future with Durable Income
Building a resilient retirement portfolio involves careful planning and strategic investment decisions. At iREIT on Alpha Marketplace, our Durable Income Portfolio is designed to provide retirees with stable dividend income and peace of mind. By prioritizing dividend safety and high-quality REITs, we aim to help investors achieve a secure financial future.
Remember, diversification and thorough analysis are crucial when investing, ensuring that your portfolio is aligned with your risk tolerance and long-term investment goals. By intelligently bearing risk and focusing on quality, you can retire confidently and enjoy the fruits of your labor.
Author's note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: Written and distributed only to assist in research while providing a forum for second-level thinking.
