LETTERS to the Editor.

Could REITs Boost Retirement Income?

Thornton Parker's concept of buying and selling cycles producing phantom wealth ("The Coming Retirement Crisis," March/April 2001), particularly when there is no income stream from dividends, makes sense.

My idea is that if part of the Social Security funds is to be invested, why not invest in REITs [real estate investment trusts]? By law, there is a guarantee of some dividend payout by REITs, thus assuring an income stream. Plus, the real estate value in REITs -- which, like stocks, are cyclical -- can produce capital appreciation. It would seem that this would not be "phantom" wealth, and would provide better returns, over time, on our Social Security funds.

I would like to have Mr. Parker comment on this, if possible.

Simon A. Sayre, M.D.

Ojai, Calif.

Thornton Parker replies:

I am not an investment advisor, but I agree with Dr. Sayre that REITs are good examples of the types of investments that are needed for retirement accounts. They raise capital and use it to make productive investments that create homes, workplaces and jobs. Some of them have royalty provisions in their leases that allow business tenants to have low rents and share their proceeds, if successful.

REITs pay significant dividends on the basis of their actual accomplishments, not future hopes, and their preferred stocks can he particularly good investments unless they have low investment ratings or call prices.

REITs also have disadvantages. The [real estate] industry is cyclical, and has unusual risks. Some REITs cannibalize each other, as occurs when shopping centers "leap-frog" each other, and many of them engage in land speculation. When traders...