Passive income is the money stream everyone dreams about. It allows you to generate income over time without working at a job. While creating passive income streams often take effort and time up front, they can serve you well for years to come.
Passive income is often generated by a rental property or a business that you own but don’t actively participate in. However, you may already be generating a passive income by investing. When you make good investment choices, your money generates more money with zero to very little effort on your part.
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Most passive income streams require effort up front. You have to save up for the rental property or build up the business. Or you have to invest enough earned income to generate a decent stream of interest-driven income. But once you do the work, some types of passive income streams will provide you with regular payments with a minimal amount of continuing effort.
Passive income streams are ideal for retirees, because they help diversify your sources of income. And since passive income streams are relatively hands-off investments, they shouldn’t cut into your leisure time too much. Here are four options for earning a passive income in retirement:
1. Rent out your property. Whether you buy a second property or rent out space in your own home, becoming a landlord can be a good way to generate passive income. Keep in mind, though, that becoming a landlord could also be a very active endeavor. Finding renters and maintaining a property can take a considerable amount of work. It all depends on how you structure things. One way to avoid the potential stressors of renting out a property is to hire a third party to manage the property for you. This will, of course, eat into your profits. But it will also let you make money from your rental properties with very little time investment during retirement.
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2. Invest in dividend stocks. You can keep investing throughout several decades of retirement, and you should keep an eye on your portfolio to make sure it’s performing well. Dividend stocks provide current income and have the potential to generate capital gains. They will start paying you right away, and can be a good way to generate extra income in retirement. Of course, dividend payments could be reduced or eliminated if the company isn’t performing well. Owning a variety of different dividend stocks can help to mitigate some of the risks.
3. Create a side business. Creating a side business during retirement can be a good investment of your time early on, especially if you start the business with a plan to turn it into a passive income stream in a few years. Whether you run a local brick-and-mortar business or a website, you should start with the goal of eventually hiring others to run the business for you.
If you already own a business, even if it’s currently just a side business, consider ways you can turn your active income passive. Start hiring writers to create content for your website, or begin training reliable managers to handle your family business. Then when you get to your retirement years, you can continue to reap the rewards of business ownership without all the daily maintenance running a company often entails.
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4. Try peer-to-peer lending. This is a newer way to invest your money for more immediate income. You can lend to others through lending cooperatives like Prosper or Lending Club. You’re basically becoming the bank for someone who needs to borrow money. With peer-to-peer lending, you take on higher risk, but also have the potential to reap higher rewards. The interest rates you can charge are higher than what you are likely to receive from a bond or certificate of deposit, and you’ll often get your return on the investment more quickly.
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4 Ways to Create a Passive Income in Retirement originally appeared on usnews.com
