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7 Passive Income Ideas to Boost Your Retirement




If you're done trading time for a paycheck and ready to start collective passive income in retirement, then this video is for you.

Stick around, and let's get into it.


Welcome back to another video from One-Up Financial. I am your host as always Eric Presogna, CPA, CFP here to help to increase income, reduce taxes and invest smarter in retirement.


Today, I'm going to talk about passive income in retirement.


And to start, I want to first define what passive income is, and what it isn't.


To do this, I decided to ask ChatGPT to explain passive income and here is the AI's response:


"Passive income refers to earnings that are generated with minimal effort or involvement after an initial investment of time, money, or resources. It's income that comes in regularly without requiring you to actively work for it on a consistent basis."


Now I want to emphasize a few key words and phrases here:


  • Earnings with minimal effort or involvement.

  • After an initial investment of time, money, or resources.

  • Without requiring consistent, active work to maintain.


I highlight these things because I know what a lot of people think when they hear the words passive income: simple, easy and care free. In fact, the word "passive" itself means not actively participating or exerting influence.


True passive income is anything but simple, easy and care free.


In fact, passive income really isn't passive income until an investment of time, money or resources (as per the definition) has been made. And even then, its still may not be passive if it requires ongoing work and maintenance.


Take monetizing YouTube videos which is a popular passive income strategy you'll find listed on almost every blog post on the topic. According to Forbes, top ranked YouTubers (who've been creating content for years and built a loyal following) earn around $5 per 1,000 views, meaning you'd need to average 1 million monthly video views to earn $60,000/year in revenue. For context, the average YouTube video gets less than 5,600 views.


Don't get me wrong: earning money from YouTube can be a great source of passive income. You just have to be aware that passive income strategies like this are more akin to starting a business or side hustle and carry a higher degree of risk and up-front cost than one might suspect.


If you're nearing or in retirement, I'm guessing you might not want to invest tons of time, money or resources into something that may or may not pay off in the future.


You're likely more interested in waking up and doing what you want, when you want without worrying too much about when the next paycheck is coming in.


If that's the case, we need to adjust our definition of passive income and remove the "after initial investment of time, money and resources" part. That means things like blogging, online courses and Ebooks which are some of the more common passive income strategies wouldn't qualify.


In retirement, you want to focus on the "earnings with minimal effort" and "limited maintenance" parts to generate true passive income.

Using this revised definition, here are 7 passive income ideas to boost your retirement:


1. High-Yield Money Market or Savings Accounts


A few years ago, this wouldn't make the list as deposit rates were abysmal at best.

Now, you can get north of 4% in an FDIC-insured high yield savings account that bears little to no risk and requires no work on your part whatsoever.


The only downside to a high yield savings account is that the high yield isn't fixed nor is it guaranteed. If the Fed decides to cut rates, expect yields on deposits to fall. Should that happen, you may be forced to look elsewhere for passive income.


2. Buying Rental Properties AND Hiring a Property Manager


I used to own a rental property and have many clients who own them as well. And they are great sources of passive income IF:


  • the property has strong cash flow

  • low tenant turnover

  • the property is in decent shape

  • you have a property manager


According to the popular Bigger Pockets podcast, the average cash flow, or total income less total expenses (excluding depreciation) for a rental property is between 7-8% of the value of the property.


But that average cash flow rate assumes little turnover with your tenants and moderate repair and maintenance costs.


Even if you do have all of these things, you also want to ensure this investment is truly passive. That means when Billy calls on a Sunday at noon and says the AC isn't working, the call is directed/handled by your property manager, not you.

Now it's likely you'll need more than one property and a healthy stream of cash flow in order to justify this additional cost, but if you really want passive income, it might require a larger up-front investment into one, or multiple properties along with hiring a property manager.


3. Buying a Small Business AND Hiring a CEO


If you're not into real estate or don't want to deal with the hassle of owning a rental property, buying a small business could be another passive income option to consider.


Sites like bizbuysell.com and loopnet.com are great online resources for local businesses for sale in your area.


I know it may sound overwhelming to own a business if you've never owned or run one before, but there are a variety of non-traditional business out there that may not require a big chunk of your time. For example: laundromats, automated car washes, ATMs or vending machines to name a few.


Similar to assessing a rental property purchase, you'll want to verify the business is generating positive cash flow, being sold at a reasonable price and is as close to turn-key as possible. A manufacturing company with 10 employees might not be as easy to step in and run as, say owning four vending machines and an ATM.


But even if it is a manufacturing company or business that requires more time to manage, and assuming cash flow and profits are there, you may also consider hiring a CEO or business manager to handle the day-to-day.


4. Renting Your Home


According to Airbnb, 25% of their hosts are retirees with the average host earning just under $14,000 annually.


If you don't want to purchase a rental property, another source of passive income could be renting out the property you already own.


Now I know what you may be thinking: having a bunch of strangers hanging around in your home while you're trying to relax doesn't quite sound like a happy and peaceful retirement.


If you plan to take a trip or have multiple vacations planned, you could consider renting your home while you're away. At the very least, this additional income should cover the cost of your travel and then some.


Obviously there's some work involved in preparing your home, researching comp prices and maintaining the property that you'll want to consider before listing.


5. Renting Your Car


If Airbnb'ing your home doesn't sound appealing, renting out your vehicle may be another option to consider.


Car-sharing companies like Turo and Getaround allow you to turn your vehicle into an income-generating investment. That may be the first time the words "car" and "investment" have been used interchangeably in a sentence!


Your potential earnings from renting your car will vary based on the type of vehicle among other factors but according to Quora, the average host earns close to $600/month, enough to cover the cost of an annual trip for two to Italy.


I've personally never rented my vehicles but from what the experts say, it's best to consider using automated pricing and demand-based adjustments, i.e. let the platform's scale and economics work for you, when listing your car.


6. Crowdfunding and Peer-to-Peer Lending


Another source of passive income is becoming a private lender. In other words, participating in crowdfunding and/or peer-to-peer lending whereby your interest/returns come from investing in, or lending money to other people or businesses. This is also referred to as Private Credit and Private Equity.


Sites like Yieldstreet make it easy for investors to navigate and invest in various privately held businesses and lending opportunities that can yield 10% or more annually. For example, I have an account on Yieldstreet and one of the investment options consists of a portfolio of loans backed by a powersports company with a target annual yield of 13.5%.


As you might imagine, private investments such as these aren't without risk. Any investment, whether it be a stock, bond or alternative (like private investments) that yields substantially more than the risk-free rate (that is, the rate you can get on a short-term government bond) should be carefully scrutinized before any investment is made.


Another important note here is that in most cases, you must qualify as an accredited investor before making these types of investments meaning you'll need to meet certain income and net worth criteria.


7. Investing in Interest and Dividend-Paying Securities WITH a Financial Advisor


Last but not least is investing in interest or dividend-bearing investments like bonds, dividend-paying stocks/funds, real estate investment trusts (REITs) or any other publicly traded marketable security that generates income.


While this concept is far from new, it's not entirely considered passive income without the help of a financial advisor.


Unless you enjoy/plan to invest on your own which again, is not really passive income, you'll want to consider bringing in a licensed, credentialed professional to manage your investments and determine, for example how much if any dividend stocks, bonds and REITs should be in your portfolio.


And that's important because I see a lot of investors make the mistake of hunting for yield, thereby focusing their investment strategy on one or a few of these types of investments which history has shown, can cost you dearly.


For instance:


Investing in just the highest dividend-paying stocks would have resulted in significant underperformance relative to the broader market over the past 20 years.


Investing only in bonds with the juiciest yields could subject you to unnecessary credit and duration risk, resulting in substantial loss of principal.


And a portfolio consisting of 100% REITs would have actually lost you money over the past 4 years.


Similar to the concepts I introduced with rental properties, small businesses and even private investments, these passive income strategies really become passive once you outsource the work to a professional.


Closing


How are you generating passive income in retirement?


Are there any passive income strategies I didn't mention that are working for you?


Please add a comment below or email me personally as I'd love to hear from you.


Thanks as always for watching our videos.

If you're interested in staying up-to-date with our market and financial commentary, please subscribe to our blog at oneupfinancial.com/blog or follow us on LinkedIn and Facebook.


Thanks again, and we'll see ya in the next one!

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