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Passive Income Ideas for All Stages of Life

Earning passive income is welcome at any stage of life but obtaining these sources prior to retirement may give you access to liquidity and the chance to build greater wealth before you get there. By diversifying your sources of income, you’re thoughtfully spreading your eggs among a variety of baskets, therefore helping to mitigate risk, and pursuing the retirement you envision.

Here are some ideas to consider for setting up passive income sources that may lead to a sense of confidence in your retirement or as you embark upon retirement.

Add income-producing assets. If you’re looking to add passive income to your portfolio you can focus on investing in stocks that pay substantial dividends. It can be beneficial to include these investments in your portfolio earlier on in order to reinvest the potential income for a longer period of time and build upon your wealth for an extended period of time. Another option would be adding interest income from bonds. To diversify your income streams even further, you could consider cash value life insurance or investing in additional fixed income investments.

Consider real estate. Real estate is not for everyone, but business models like Airbnb and Vrbo have made it easier to own and operate short-term rental properties. Longer-term rentals might be a better option for those who want steadier, more predictable income. If you do consider real estate, be certain to take maintenance and insurance expenses into account.

Consider taking withdrawals in a tax-efficient order. If you have different types of retirement accounts, be mindful of where you’re drawing income from first. This is something you would likely need to consult with your advisor and your qualified tax professional on to formulate the most efficient strategy for your individual situation.

Turn your passion into profits. This may not be as passive as some of the alternatives however, you may find it more fulfilling. Retirement does not have to mean the absence of work entirely. Rather, it can be an opportunity to maintain an active lifestyle and pursue passions that you were unable to explore throughout your career. By investing your time into something you love, you can potentially obtain supplemental income and experience things you haven’t gotten to enjoy in the past.

Set aside a reserve. Sometimes helping to preserve what you have can be just as important as earning. Placing resources in a cash reserve can ensure that you have access to easily withdrawable funds. These funds can be positioned from the effects of market fluctuations while still gaining interest through low-risk money market accounts. Positioning immediate funds from volatility can allow your larger retirement savings to potentially recover from changes in the market without restricting cash flow. 

Consider your net worth entirely. With recent volatility, you may need reassurance that you have enough planned retirement income to cover your needs, wants, and wishes. If you’re not sure, have a conversation with your advisor to discuss all the pieces the make up your net worth. Many people neglect to factor in potential profits from selling their business, downsizing their home, their insurance policies, cash on hand, forgotten 401(k)s tied to previous employers, and other assets like inheritances as part of their personal retirement income plan.

There are a lot of moving parts when it comes to planning for retirement and incorporating passive income sources is just one of those. As you near this milestone or even surpass it, we are happy to discuss any of these topics as well as how Social Security plays a part. As you get closer to leaving the 9 to 5 behind, let us help you better prepare for the retirement you want.

 The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Jim Hyre and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. 

Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Real estate investments can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws and interest rates all present potential risks to real estate investments.
Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one’s entire investment. Dividends are not guaranteed and must be authorized by the company’s board of directors. 
There are special risks associated with investing with bonds such as interest rate risk, market risk, call risk, prepayment risk, credit risk, reinvestment risk, and unique tax consequences.
This is not a recommendation to purchase or sell the stocks of the companies mentioned.