Retirees who are worried about inflation eroding the value of their income may want to check out real estate investment trusts.
REITs are companies that own and/or operate properties like shopping malls, office buildings, warehouses and apartment buildings. Although they come with more risk than some other income-producing investments — such as Treasury bonds — they also have inflation protection built into them, experts say.
As the U.S. continues climbing back to pre-pandemic economic activity, inflation has been on the minds of investors. A key inflationary measure — the core personal consumption expenditures price index — rose 3.4% in May from a year earlier. Another gauge, the consumer price index, also jumped last month to 5% over the same period.
However, given where the economy was a year ago — still in the throes of pandemic-induced shutdowns — Federal Reserve officials view the jump in prices as transitory.
Nevertheless, retirees searching for steady income that would be less impacted by inflation could consider REITs. Roughly $1.5 trillion is invested in U.S. REITs, according to Morningstar Direct.
Due to their legal structure, REITs are required to pay out 90% of their taxable income to shareholders in the form of dividends. Those payments typically are made quarterly or monthly, Rimassa said.