Investors looking to bolster their income portfolios have long looked to dividend-friendly real estate investment trusts (REITs) to get the job done. But recently, the appeal of high-yield REITs has intensified, thanks to changes to conventional investing wisdom.
For more than a quarter century, the “4% rule” governed many investors’ withdrawals from retirement savings. According to this rule, investors would have sufficient funds in their portfolio to last a lifetime if no more than 4% was withdrawn from the portfolio in year one of retirement, with the withdrawal rate in subsequent years increasing only as much as needed to keep pace with inflation. Dividend investors, then, could comply with the 4% rule and never need to touch their principal by building a portfolio that yields 4%.