4 Signs Boomers Need a Passive Income Stream
Written by
John Csiszar
Edited by
Gary Dudak
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Baby boomers are generally at the age where they’re actively contemplating retirement, if they are not already there. But many will find that their income streams, both before and after retirement, are not quite up to the level they desire.
Others may feel that even though they have prepared for retirement, they want a little extra to ensure they’ll be able to enjoy the lifestyle they want after they stop working. In both cases, setting up a passive income stream may be the answer. If you’re a boomer and you find yourself in any of the following scenarios, it might be a sign that you’re in need of some passive income.
You Don’t Have Enough Saved for a Satisfying Lifestyle
There are plenty of online calculators — and financial advisors — that can give you a picture of how much income you’ll likely be earning once you retire. If the sum of your retirement savings, Social Security income and any other sources of income like pensions or annuities are coming up short, you’ll have to supplement them with additional income to lead the lifestyle you want.
Setting up a passive income stream might be the long-term solution.
You’re Between Jobs
If you’re between jobs, it might be a sign that you should have a passive income stream in place. Obviously, it’s hard to set up a stream of passive income while you’re out of a job. But this can be a sign that if you’re in between jobs in the future — or when you’re retired, which is the ultimate “in between jobs” scenario — you should have a passive income stream in place.
Once you get your next job and start earning a regular income stream again, consider taking advantage of that opportunity and using some of that money to set up a passive income stream for your future.
You’re Looking for Additional Financial Security
There’s not really such a thing as an “overfunded” nest egg, but there’s nothing wrong with building up a larger retirement account balance than you think you need. If you’re the type of saver who wants to absolutely max out your retirement investments, supplementing your earnings with a passive income stream is one of the best ways to accomplish this.
You’re Tired of Working
While some people enjoy their work and never want to stop, others can’t wait to give it all up and retire. Of course, that’s easier said than done, particularly on the financial side.
If you want to stop working but don’t have enough income to do so, it’s a sign that you may need to build a source of passive income to supplement what you’re already earning. In addition to providing more income now, a source of passive income can help sustain you after you retire as well.
How Can You Develop a Passive Income Stream?
When it comes to passive income streams, rental properties are one of the most commonly cited examples. There are two main benefits to generating passive income through rentals.
First, if you take out a fixed mortgage to buy your property, that payment will never change. While your property taxes and maintenance costs may increase over time, the amount of your actual mortgage payment remains fixed, typically for 30 years. The rent you charge your tenants, on the other hand, typically increases over time, often annually. In the right area, the rent you charge may cover your entire mortgage payment right off the bat, and annual rent increases will only pad your profits. Meanwhile, your property will hopefully be rising in value, providing you with extra equity that you may be able to draw out and use to help fund your retirement.
One way to avoid the whole mortgage problem in the first place is to simply rent out an extra room or two in your existing house. Many boomers end up with bigger houses than they really need by the time they retire, offering an excellent opportunity to rent those extra rooms out. In most cases, that rental income amounts to pure profit, as you may not have to spend much at all to get your rooms rental-ready.
Another way you can generate passive income is through investments. Stock dividends and interest on bond payments are two of the most commonly used. Once you retire, for example, you can consider swapping some of your growth stocks, which may not cast off any income at all, into income-generating investments. In higher-rate environments, like 2023, there are plenty of opportunities to generate fairly sizable levels of income without taking on too much risk.
