Why Smart Retirees Are Embracing Passive Income Streams
Passive income streams can be powerful supplements to nest egg withdrawals in retirement.
When done well, these income sources don’t require much maintenance and can help you hedge against rising costs. Some of the smartest retirees are using these passive income streams to fund their lifestyles. Read on for how you can, too.
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Types of passive income
There are many ways to generate passive income. Here are four to consider:
1. Dividend stocks and funds
Dividend stocks and funds are reliable, simple ways to generate passive income. You can buy shares of these companies or funds and receive regular payments. Mature dividend-paying companies (also known as income stocks) are often able to achieve moderate growth as well.
Some dividend investors accumulate shares before retiring and capitalize on dividend reinvestments. This investing model lets you reinvest dividend proceeds back into the market, buying additional shares, which can increase your passive income every quarter. Just keep in mind that companies that offer dividends don’t offer the same growth potential as more risky stocks. And dividends aren’t guaranteed: Companies can lower or cut them completely if they choose.
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2. Real estate crowdfunding
Real estate is great for cash flow, but it can also be too expensive for many investors — and a nightmare to manage. No one wants to spend their golden years receiving phone calls in the middle of the night that their tenant has a plumbing problem.
That’s why some retirees turn to real estate crowdfunding, which involves pooling your money with other investors to buy into real estate without actually having to manage the property yourself. Real estate crowdfunding platforms give you the ability to invest while staying hands-off the property, and receive regular income.
3. Creating digital products
You may also be able to use your skills to generate income by creating and selling digital products. Some retirees create eBooks, templates and online courses related to their past careers or hobbies that can be sold online.
Creating and selling digital products requires some upfront work, but it can turn passive over time. You can also treat this income stream as a part-time job if you’re looking for some extra work to keep you busy in retirement.
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4. Annuities
Annuities are another resource for retirees who want additional income streams. These financial products turn your money (either in a lump sum or premiums) into regular payouts.
Depending on the annuity, these products can offer tax-deferred growth and can be a good way to help weather market volatility.