
I think passive income is a great source of additional income in retirement. When you’re working and making money, the idea of passive income might sound like alien to you. Many people don’t have time to put an extra work building passive income after long hours spent at work.
But if you’re in your 50’s or 60’s the benefits of passive income will become clearer to you. You’re getting closer to retirement and starting to understand that at some point you will quit your job and start living on the fixed income. It’s a good time to start thinking about how to diversify your income so that you’re not too reliant on one source.
What is passive income?
For me, the best description of the passive income would be the income you earn with little effort or maintenance. In the beginning, you will need to put extra work to set yourself up for the income. But after a certain period and most of the work done, you should expect income continually comes without much effort from you.
You should still expect a little maintenance from time to time after you set it up, but overall the passive income stream should continue on its own.
The benefits of earning passive income in retirement:
- You can retire, enjoy your life more and feel comfortable knowing that you’re still making money.
- You can continue to make money with little work or maintenance.
- You can increase and diversify your retirement income. The fear of running out of money in retirement is big among retirees. But you can ease off that fear by knowing that you have an additional stream of income.
- You can travel anywhere you want and enjoy life knowing that you’re still earning an income to support your travel or pay your bills and other necessities.
Here are the 3 best ideas for creating passive income in retirement:
1. Create passive income with real estate
Investing in real estate is the most well-known and effective way to build wealth and create passive income in retirement. It can be done in several ways:
Buy and invest in rental property

Buying a rental property is one of the traditional ways to create wealth and passive income in retirement. But you have to have enough savings to buy a property and then find tenants and collect rent.
From my personal experience being a landlord is not an easy task. It comes with the burst pipes, clogged toilets, and dealing with messy tenants. Also, it comes with some hefty investment of money to get started and locking that money up for a long time.
To earn passive income from a rental property you need to put a lot of work upfront by buying and maintaining it for years. Then your property needs to generate enough cash flow so you can use it as passive income. Hiring a property management company is not a bad idea, but you’ll need to pay 10 to 20 percent of your profit to manage your rentals.
Please remember that this kind of passive income comes with investing a lot of your time and finances before you get the benefits of earning passive income.
Home-sharing
I am sure you’ve heard or read about ‘home sharing’. The idea of home-sharing is becoming more and more popular. There are a lot of older people or empty nesters who own a home and don’t want to move.
They have an empty room or vacant space that they can rent out to a long-term roommate or housemate. It could become a good way to make some extra money every month and have a company in your home.
Rent a room
Vacation rentals gained huge popularity lately. You can list a room or even your home on a vacation rental website such as:
VRBO – Vacation Rentals by Owner
Renting your home or a room through popular websites doesn’t require a hefty investment on your part to get started as buying a rental property.
However, this endeavor will still need some of your time and money to maintain and continue in order to earn an income. You will have to keep the room nice and tidy, do a load of bedding sheets and towels after guests depart. But you can generate a great source of additional income in retirement and increase your social network, so you won’t feel bored or lonely.
You can start by listing a room or your entire home, along with details like prices, dates, and description of your place, so travelers can book your space instead of a hotel.
One of my friends earns modest passive income by renting a room as a vacation rental in her beautiful condo. She has to put up with some extra work to welcome her guests, but she enjoys social interaction with different people while earning some income to pay off her mortgage.
2. Invest money in passive income sources
Invest in REITs – real estate investment trusts

An investment in REITs offers all benefits of real estate investing without the hassle of being a landlord, dealing with tenants, or buying and maintaining individual properties.
REITs own and manage income-producing commercial and residential properties domestic or international. There are many different types of REITs. Most important to understand that REITs have enough equity in its many properties so they can afford to pass part of its income on to investors or shareholders.
When the properties appreciate, the REIT pays out the profits to their shareholders in a form of dividends. Depending on the economic situation, REITs can pay higher dividends than stocks or bonds.
When you buy shares in REIT or REIT fund, you profit from the dividends that real estate companies pay to investors. You have a choice of buying shares in individual REITs or buying a mutual fund.
For many years I have been investing in individual REITs. But recently I sold all shares and invested all the money into the Vanguard REIT Index Fund (VGSIX).
Investing in REITs is one of my favorite ways to generate passive income. I would prefer it over owning a rental property and being a landlord. I like it because I don’t’ want to have the hassle of being a hands-on landlord when I retire. Investing in real estate via REIT will allow me to enjoy my life with leisure activities and travels while still earning passive income.
The 10 Best REITs to Buy for 2020
Invest in dividend stocks

Investing in dividend stocks is my favorite type of investment. You’ll have to do your research to find the best dividend stocks. That way, you can make sure that your dividend payouts will last and generate decent passive income in retirement.
When I was building my portfolio of individual stocks, I focused on buying dividend stocks. I did my research to make sure that the company has a history of strong growth and financials to support that growth. Many years later many of these stocks have shown decent dividend growth.
If you don’t want to invest in individual dividend stocks you can invest in dividend mutual funds. The benefit of it that the fund is managed by the full-time services of a professional team who looks after your shares and try to increase a return on your investment.
The 10 Best Dividend Funds for Any Investor
I would consider investing in dividend stocks or funds is one of the most passive ways of making money. Besides doing research, finding the best dividend stocks and buying them, you don’t need to do any other business activities.
Related Post: How to Set Up Your Retirement Portfolio?
High Yield savings account or Certificate of Deposits
High Yield savings accounts are bank accounts that earn you a higher interest rate than a traditional savings account and checking accounts. A higher interest rate means a higher return on your money.
However, we live in a low-interest-rate environment and honestly, I don’t think you’ll earn significant passive income from your savings. But If you like to keep a large amount of cash in the bank it’s a better choice to keep it in the high yield savings account.
The average savings account ARY (annual percentage yield) is 0.09 percent, but some high-yield savings accounts offer ARY closer to 2 percent. It will make a big difference with time.
For example, if you keep $10,000 for 5 years in a traditional savings account with 0.09 percent ARY, it would worth only $10,045. However, if you decide to open high-yield savings account with 2 percent ARY, the same money will worth $11,041 after 5 years.
Best High Yield Savings Accounts
You can get some additional income through a Certificate of Deposits – CDs if you don’t mind locking your money up. You can get rates slightly higher than with high yields savings account.
Bonds
Investing in bonds can be a great way to earn a passive income in retirement. It’s very popular between retirees or people closer to retirement because bonds allow you to preserve your capital and avoid the volatility of stocks.
However, bonds may not offer the high returns of stock investment. But bonds are more stable than stocks and are a great way to create a steady stream of income in a form of regularly paid interest.
When you invest in bonds, you are lending money to a company, the US Treasury, or a local government. As with any other loan, the issuer promises to pay the money back plus interest. This simple fact that you’re going to get your money back at a specific time in the future makes holding bonds a great investment for retirement.
The 7 Best Bond Funds for Retirement
Annuities
Annuities are not a popular way of making money in the investment community, because it’s very expensive, complicated and sold by the insurance companies. But in some way, you can consider it as a passive income.
When you buy a lifetime or immediate annuity, you’re exchanging a portion of your retirement savings for a guaranteed monthly income. So, in exchange for the cash, you’ll buy an income stream that will last as long as you live. For me, it’s a great way to bring a passive income in retirement.
Our plan is to invest $100,000 in the immediate annuity when Roman and I retire. This way we will get a guaranteed monthly income to cover our basic utilities and other necessities.
I know that for most people annuities are a last resort investment. They are too expensive and come with high fees and withdrawal penalties. But on the other hand, annuities can give you peace of mind and reduce the fear of running out of money in retirement.
3. Create a side business

Very often passive income comes with a large upfront investment such as buying rental properties or investing in dividend stocks. But some strategies can bring an extra cash without investing a big load of money:
Blogging
If you like to write and share your thoughts with other people you can start a blog or website to earn some passive income without investing a lot of money upfront.
However, you’ll need to put up with a lot of work of creating an appealing website, write and publish content for your blog, add images, advertise on all social media platforms and find ways to gain readers and followers. This will take a lot of work before you can make any kind of money from your website.
With time and a lot of effort, you might create a stream of income coming from your side if you have enough readers and followers. You can sell your own products, e-books or courses to your readers and followers. Or you can get engaged in affiliate marketing and sell products or courses created by other people or companies.
Write an e-book
Writing an e-book might not be your idea of a passive income for retirement. But we live in a new age with the advantage of self-publishing. For example, Amazon’s Kindle Direct Publishing allows you to write and sell your content easily.
Are you ready to spend a considerable amount of time writing, publishing and selling a book online? If the answer is yes and it all goes well, you could be earning a passive income in the form of royalties for many years. Also, you can sell PDFs version of your e-book through your personal website and this will help you to earn even more money per book than Amazon does.
Here are a few ideas for writing an e-book: travel guides, cooking, finance, investing in stocks, investing in real estate, landlording, gardening, painting, health and wellness, fitness, photography, etc.
Putting it all together
In retirement, you want to do fun things without the burden of working for a boss. So, if you can find a way to generate an additional stream of passive income it will be a smart use of your time. The great benefit of passive income is that it will let you enjoy life more.
Related Post: What is the Source of Your Income in Retirement?
Do you know what is the source of your income in retirement? Have you thought about creating passive income for your retirement?
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Disclosure: This information is only educational. I am not providing any specific advice or recommendations to any of my readers.
This post was very helpful. Dividend investing is one of my favorite passive income ideas, especially if you have the time to let it grow and reinvest the dividends. But I don’t think I want to be a landlord and deal with tenants during my retirement years. We have a few friends who bought rental properties for investment. And the stories they told us about their tenants or broken pipes keep me staying away from rentals.
I agree with you that not everyone wants to be a landlord and deal with tenants and maintenance during retirement years. That’s why not everyone considers rental real estate passive or hands-off investment. I like investing in dividend stocks and REITs. This kind of investment generates real passive income.
A great list of passive income ideas for retirement. But like with many other things you need to start early with dividends and real estate investing if you want to create sufficient passive income. Interesting idea about writing an e-book, publish it and collect royalties for years or sell it through your own web-site.
Glad to know that you found this post helpful. And yes, it takes time and money to build good passive income from real estate or stocks with dividends. Thank you for sharing your thoughts!