I don’t know about you, but my social media feed is full of stories of people who’ve retired at 40 or 50 and are living off of passive income. They’re often pictured in gorgeous international locations. It’s quite the dream.
The reality is a little different. Early retirement is achievable, but it’s not super common — and it’s unlikely to be all cocktails and luxury vacations. According to Gallup data, only 2% of people aged 40 to 49 are retired. That figure goes up to 11% for 50- to 59-year-olds.
If you want to stop work before you’re 65, creating passive income streams will be crucial. Here are three that can generate thousands of dollars a month.
1. Put real estate to work for you
If you own property, there are several ways you can put it to work for you — from renting out a room to getting people to pay to use your garage space.
Rental income
Renting is a popular way for retirees to monetize their homes. Analysis by Boston College’s Center for Retirement Research showed that rental income provided cash for around 1 in 10 households where at least one person was over 65, per the Wall Street Journal.
The difficulty with rental properties is that they aren’t very passive. Passive income should generate cash without you having to actively work. In contrast, managing property and handling tenants can feel like a full-time job. If you go this route, hiring a property manager could minimize the time involved. Also, having a separate business bank account can make it easier to manage your money.
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REITs
Real estate investment trusts (REITs) are much more accessible than owning property — and they take a lot less work. REITs are companies that own and manage a mix of income-producing properties. That might mean office buildings, malls, hotels, data centers, and more.
Many REITs are listed on the stock exchange, so you can buy them through a brokerage account. The great thing about REITs is that they’re required to pay 90% of their income in dividends. This makes them a popular source of passive income.
2. Create low-maintenance online businesses
The idea of creating a small business to fund your early retirement might sound counterintuitive. But once you’ve invested the time to get things up and running, some businesses will practically run themselves. Particularly if you’re able to automate customer interactions and other tasks. Here are a couple of ideas.
Print-on-demand stores
The fantastic thing about print-on-demand is that you don’t have to manage any inventory or shipping. Years ago, if you had an idea for a funny T-shirt or poster, you’d have to first pay to print and store them, then you’d have to sell them yourself. Technology has turned this on its head.
Now all you need to do is design your product — which might be a hoodie, mug, hat, book, tote bag, or something else. You can sell the designs on your own store or via marketplaces like Amazon or Etsy. When a customer makes a purchase, your print-on-demand partner will produce and ship the item.
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Create an online course
If you have skills to share, producing an online course could be an excellent revenue stream. Bear in mind that it can take a considerable amount of time to create the material and videos. Research the topic and demand and think about how you can best share your passion and experience.
There are several online course platforms such as Udemy, Skillshare, and Teachable. Look for the one that has the right pricing and features for you. Some have a wide existing student base. Others might help you more with course design and customer support.
3. Invest in dividend-paying stocks
REITs aren’t the only investments that generate dividends — some companies pay them, too. One way to fund your early retirement is to shift your asset allocation toward dividend-paying stocks. Companies that pay dividends are often more stable, which might appeal to retirees.
The downside of dividend investing is that you might not generate the same investment gains as with, say, growth stocks. Each can have a place in your portfolio. The right mix of investments depends on your financial needs and goals.
Bottom line
Having several passive income sources is one way to make the dream of early retirement a reality. It takes planning and dedication to build the money streams that will fund your non-work life. But a combination of investments and low-maintenance businesses can make it possible.
