10 Ways to Generate Passive Income for Retirement

Passive income streams can be used to supplement your retirement income, ensuring you have enough money to enjoy your golden years without financial stress.

With how unpredictable the market can be, it’s important to diversify your income to ensure you fulfill your financial needs throughout retirement.

How to Earn Passive Income for Retirement

Here are 10 of the most effective ways to earn passive income for retirement:

Dividend Stocks
Interest-Bearing Accounts
Bonds
Annuities
Invest in Real Estate
Peer-to-Peer Lending
Rent Your Property
Pursue Your Passions
Share Your Insights
Reward Accounts

1. Dividend Stocks

These stocks pay dividends to stockholders, usually monthly, but sometimes quarterly or semi-annually. Since companies that regularly earn a profit offer dividend stocks, you can use the funds to supplement your monthly income.

Keep in mind that dividend stocks don’t always have the greatest returns, aka capital gains, but the regular dividends they pay can supplement your retirement income and provide diversification.

2. Interest-Bearing Accounts

Interest-bearing accounts like CDs and high-yield savings accounts can also generate a passive income for retirement. They may not provide the same returns as stock market investments, but they provide liquidity and are much less risky.

For example, it’s not unusual to find high-yield savings accounts paying as much as 5% or more, giving you a stable return on your investment while ensuring you can access the funds as needed.

Similarly, you can find high interest rates on CDs, but they have time commitments and often have higher minimum deposit requirements. Before investing in a CD, ensure you can leave the money in the timed deposit for the term. If you withdraw funds early, you may have to pay a penalty equal to three months or more of interest.

3. Bonds

Bonds are another form of conservative investment to diversify your portfolio. Rather than a deposit account, bonds are loans you make to the government or a company. You earn interest on your investment and know exactly when the bond matures and when you’ll recoup your investment.

Government-issued bonds are virtually risk-free but pay lower yields than corporate bonds. There’s almost a guarantee of repayment because governments can increase taxes to have the funds to repay bonds. Corporate bonds are loans to companies that may or may not make good on their debt but pay higher yields to compensate for the risk.

4. Annuities

Annuities are a way to ‘buy passive income’ for the future. You invest a lump sum of money now in exchange for guaranteed income for a predetermined period, with some annuities lasting as long as your lifetime, even if you outlive the amount contributed or earned.

You can set up certain protections, including the ability for the funds to grow with inflation, or you can increase the payments to cover another family member, such as a spouse. It’s important to set up a beneficiary on your account should you die before you use up the funds contributed to the account.

5. Invest in Real Estate

Investing in real estate is a tried-and-true way to have passive income for retirement. Fortunately, you don’t need a lot of capital to do so, and you can make completely or somewhat passive investments, depending on your desired level of involvement.

Most real estate investments pay dividends or regular income through rent, interest (for loan investments), and capital gains when the property is sold.

REITs: Real estate investment trusts are truly passive because the real estate company does all the work. You purchase company shares, which distribute 90% or more of its profits to shareholders. REITs may invest in many types of commercial real estate, including office buildings, medical facilities, hotels, apartment complexes, and shopping malls.
Real estate rentals: Investing directly in real estate rentals requires much more capital and involvement in the investment. Granted, there are ways to make rental real estate passive if you hire a property management company to handle the property and tenants. This is a good option for those living in an area with a high demand for rentals.
Crowdfunding: If you only want to invest a little capital in each commercial real estate investment, you can consider crowdfunding. This method allows you to invest in individual commercial real estate investments with other investors. You can sometimes invest as little as $25 in each property, allowing you to diversify your investments and capitalize on the different markets.

6. P2P Lending

Peer-to-peer lending (P2P) allows investors to invest in consumer loans. You may loan money to consumers experiencing emergencies or people looking for funding to start a business. The P2P platforms rate the borrowers based on their credit, income, and ability to repay the loan, so you know what type of risk you’re taking.

P2P loans are generally considered risky, but you can diversify your portfolio to include loans across multiple grades to reduce the risk of loss. Lending Club is a common P2P platform investors use to earn passive income in retirement.

7. Rent Your Property

Renting your property is another great source of passive income for retirement. This works well for retirees who have a vacation home or even if you have a spare room in your primary residence.

There are many ways to rent your property, including:

Airbnb: With Airbnb, you control when the property is available, the amenities you offer, and the rental prices. Airbnb takes a percentage of your earnings, but you leverage their large audience to increase the chances of renting the property and supplementing your income.
Neighbor: If you have extra storage space you don’t use, you can rent it on Hosts list many types of storage space, including garages, attics, crawlspaces, and spare rooms. Like Airbnb, you control the listing, duration, and what you charge.
Hipcamp: If you own land that can be used for tent, RV, or cabin camping, you can list it on Hipcamp. You list when the property is available and what it’s best suited for to ensure you get ‘happy campers’ and can supplement your retirement income.

If you don’t have a property to rent but have extra stuff lying around you know others could use, consider renting it to make passive income. You’d be surprised at what people want to rent!

Here are some popular apps to rent your stuff:

Turo: If you have an extra car or don’t drive much during retirement, consider listing it on Turo. Turo includes $750,000 in liability insurance and 24/7 roadside assistance for renters. They claim the average person with one vehicle to rent makes an average of $10,516 annually, which can be great to supplement your retirement income.
RVShare: RVs are nice, especially in retirement, but you lose money when they sit around. Instead of letting your RV collect dust, turn it into passive income in retirement by listing it on RVShare, the Airbnb version for RV rentals.
Boatsetter: If you have a boat, chances are it sits much more than you use it. Turn it into passive income by listing it on Boatsetter. It doesn’t matter if you have a small two-person boat or a yacht; there is a demand for boat rentals of all sizes.

8. Pursue Your Passions

Did you know you could turn your passions into passive income in retirement? If you have a special skill or hobby, chances are you can turn it into a money-making opportunity.

Here are a few common ideas, but the sky is the limit!

Tutoring: Whether you were a teacher in your past life or you’ve always had a passion for teaching others, you can make money tutoring. While it’s not a 100% passive income opportunity, you only work for an hour at a time and set your hours and rates to supplement your retirement income while keeping your brain active.
Photography: If you love taking pictures, you can make passive income selling stock photos on sites like Shutterstock and iStockPhoto. While you must do some work by taking the pictures and uploading them, they then sell themselves. Each time someone purchases one of your images, you earn a small commission. You can keep the photos listed for as long as you want, potentially earning you a lifetime income.
Crafts: If you’re the crafty type, you can keep your hands and mind busy while also making money by selling the items on Etsy. Starting an Etsy shop is free, but you’ll pay a small fee for each item you sell. The tradeoff is you can leverage Etsy’s large audience to make more money.

Do people always turn to you for advice or to learn new things? You could turn your knowledge into passive income in retirement by starting a blog, YouTube channel, podcast, or course! You don’t have to be famous or have unique abilities. If you are passionate about teaching your audience about different topics, you can make money doing it.

Blog: Over 500 million blogs exist, but you can become a part of the fun. You only need a niche or topic you are passionate about and the audience to read what you write. The key is finding a unique niche aspect to stand out from the competition. You can make money by monetizing your blog with affiliate links when you have a decently sized audience. You earn a small commission when your audience members click the link and purchase something.
YouTube channel or podcast: If writing isn’t your thing, you can make money starting a YouTube channel or podcast. The same premise exists: you need a niche and an interested audience. Like blogging, you make money from affiliate links and ads. You may even be approached by brands that want to sponsor a video or podcast.
Create a course: If you are knowledgeable enough on a topic that you can teach a course, you can create it in an online platform, like Teachable, and sell it as many times as people will buy it. To increase your passive income in retirement, you can offer ways to upsell, like memberships, future courses, or one-on-one support.

10. Reward Accounts

A fun way to earn passive income in retirement is to look for rewarding accounts constantly. Financial institutions and companies attract new customers by offering bonuses and rewards for signing up.

Here are the most common rewards to consider:

Bank bonuses: Banks often pay a bonus to new customers. They generally have strict requirements, like opening a specific type of account and making a minimum opening deposit. Some have other requirements, such as the number of debit card purchases or direct deposits they must receive.
Credit card sign-up bonus: Many credit card companies, like banks, offer new sign-up bonuses. You typically must be a new customer of the brand and must meet the minimum requirements. Most credit card companies require you to spend a certain amount to earn the bonus within a specified period.
Cashback credit cards: If you regularly use credit cards (and pay them off), consider applying for cashback credit cards that pay you for your purchases. Find cards that pay the highest rewards for the categories you spend the most, such as grocery, travel, or gas, and get paid to spend money.
Cashback apps: Another way to earn passive income for shopping without using a credit card is cashback apps. Rakuten, Upside, and Ibotta are popular apps that pay you for everyday spending as cashback or gift cards.

How Is Passive Income Taxed in Retirement?

The type of passive income you earn in retirement will determine how it’s taxed. Almost all income is taxed in some way, but some income, such as long-term capital gains, is taxed at a lower tax rate than income taxed at your ordinary tax rate.

If you’re investing to earn passive income for retirement, consider working with your tax advisor to use tax-loss harvesting strategies. This helps offset capital gains and lower your tax liabilities in retirement.

Passive Income Can Boost Your Retirement

Think of passive income as extra money during retirement. Because it can be unpredictable, you shouldn’t rely on it, but the extra money can help you fulfill your goals during retirement.

If you make enough passive income in retirement, you may be able to withdraw fewer funds from your retirement account, ensuring you’ll have more to last throughout your lifetime. Even if you withdraw the same amount from retirement, having extra money can help offset financial emergencies or allow you to let loose a little more.

Diversify your efforts, but remember your risk tolerance. Don’t take too many chances with your retirement income, but find ways to grow it so you have supplemental income and can rest assured that your golden years are as enjoyable as possible.