(Newswire.net — December 24, 2016) — Once you enter your 40s and 50s, retirement is definitely something you should be taking seriously. Many people begin to tire out and dream about finally enjoying some of the money they’ve spent the past few decades earning. But if you aren’t prepared to make money during retirement, you’re going to blow through your savings pretty quickly.
Three Ideas for Passive Income
During retirement, you need to have a strategy in place for making money. You probably don’t need to match your monthly income from your working years, but it’s a good idea for the average person to plan on replacing between 25 to 50 percent of it. This figure could be more or less depending on how well you’ve saved over the years.
Since your plan is to relax a little bit and eliminate unnecessary stressors during retirement, the goal is to develop passive streams of income that let you make money while doing something else. Sounds pretty fantastic, right? Well, you’ll find some ideas below.
1. Rental Properties
The very first passive income vehicle most people turn to is real estate. With rental properties, you can put your money in a strong appreciating asset while also generating a steady income in the form of monthly rental payments from tenants. If you’re able to pay for a property in cash – or at least the majority in cash – you can bring in even higher returns.
Owning rental properties isn’t always considered passive, though. There can be midnight phone calls and weekend repair jobs if you aren’t careful. That’s why most savvy investors suggest paying the fee for a property management company to handle issues that arise. When the numbers align and you get long-term tenants, this can be a great setup.
2. Annuities
Are you familiar with annuities? In this situation, you invest a lump sum amount into an insurance company that uses your money for its own investments and financial responsibilities. Over the years, your money earns interest. In return, you begin receiving monthly payments at a specific date and for a specified time period. Many even guarantee payments for the rest of your life.
Annuities make sense if you expect to live a long life and have enough time to earn back your initial lump sum. There are many different kinds of annuities and it’s important that you carefully review any fund before investing. But under the right circumstances, this can be a fantastic way to earn incremental income without lifting a finger.
3. Dividend Stocks
Just because you’ve reached your retirement age doesn’t mean you should suddenly stop investing in the stock market. During your retirement years, dividend stocks are a great idea. They have the potential to generate capital gains and can help you generate a small amount of income.
As a reminder, dividend payments can be reduced or stopped at any time if the company doesn’t perform well. So it’s best to spread yourself out over multiple dividend stocks to curb risk. With the right mixture, you can not only see your portfolio grow, but you can also receive monthly, quarterly, or annual payments to offset some of your living expenses.
How Will You Earn Money?
Bringing in $2,000 a month in passive income may not seem like a lot to some retirees who spent their careers earning five-figure monthly salaries, but it adds up. If your retirement were to last for 30 years, $2,000 per month adds up to roughly $720,000.
That’s $720,000 you don’t have to drain from your retirement account and can instead save for your children, grandchildren, favorite charity, etc. A little bit goes a long way, so make passive income a priority.