Investing During Retirement Can Pay Off Big Time

While you work, you save for retirement, but once you retired, you will likely need to focus more on getting income from your investments.

Brenda Merschdorf from Edward Jones Financial was on the CBS 58 News at 4 Thursday with some options.

Bonds are an obvious choice. But, if interest rates are low when you retired, as they have been for several years now, bonds might not provide you with as much income as you need.

If you have to explore other types of income-generating vehicles such as dividend paying stocks or real estate investment trusts or REITs.

Different types of REITs are available. For example, equity REITS invest in and own commercial properties, such as hotels and shopping centers, while mortgage REITs own and invest in property and mortgages.

On the one hand, mortgages REITs are considered riskier than equity REITs. But, mortgage REITs often pay quite large dividends, although the payout can be inconsistent.

Changing interest rates will also affect the value of mortgage and equity REITs differently.

Specifically, rising interest rates will likely cause the market value of the property mortgages inside mortgage REITs to fall, whereas equity REITs, which own actual buildings, might actually benefit if the Federal Reserve raises interest rates, as such as move would indicate a strong economy, more jobs and great demand for office space.

In the short term, though, equity REITs can react negatively to an interest-rate increase.

Over the long term,this movement can be offset by the benefits of earnings and dividend growth driven by a growing economy.

Bottom line, you have to weigh the merits and risks of these investments, including interest rate risk, credit risk and market risk and determine which of them or which combination of them is best for you.

Michele McCormack's interview with Edward Jones Financial on the CBS 58 News at 4 is attached to this story.