Experts Say Retirement Portfolios Should Include Real Estate

By Karen Hube

It seems that many retirees have a bit of Donald Trump in them these days.

In recent years, older investors have been increasingly buying second homes, land and commercial properties to shore up their nest eggs. While stocks were going nowhere after tanking in 2000, real-estate prices logged their biggest rise on record between 2001 and 2005, with an average annual 9% gain. Some markets, such as Las Vegas, Southern California, Phoenix and Miami-Dade County saw double-digit returns of at least 20%, according to the National Association of Realtors.

But with mortgage rates climbing and home prices in some markets falling, is there still a chance to make money in real estate? Or is the retirement and pre-retirement crowd better off stashing its dollars in a traditional mix of stocks and bonds?

The answer, according to financial planners and real-estate analysts, is that most retirement portfolios should still include some real estate. That's because land and property are "loosely correlated to the stock market," says Seth Pearson, a certified financial planner in Dennis, Mass. In other words, the value of real estate tends to rise when stocks are going down.