Creating passive income, not a passive activity
The idea of building wealth through passive income has understandable appeal, especially if you’re worried about being able to save enough from your work earnings to meet your retirement goals.
For example, to generate $1,000 a month in retirement income from a portfolio, you’d have to amass about $250,000, assuming a 5 percent withdrawal rate. Better to create a passive income stream to help you reach this goal.
What is passive income?
Passive income includes regular earnings from a source other than an employer or contractor. The IRS says passive income can come from just 2 sources: rental income or a business in which an individual does not actively participate. Examples include book royalties and dividend-paying stocks.
It’s easy to think as passive income as money you earn while sitting on a beach sipping mojitos, but there is lots of work involved, says financial coach and expert Todd Tresidder.
“Many people think that passive income is about getting something for nothing,” Tresidder says. “It has a ‘get rich quick’ appeal … but in the end, it still involves work. You just give the work upfront.”
If you’re thinking about creating a passive income stream, check out these five strategies and what it takes to be successful with them.