Retiring from a full-time job doesn't necessarily mean that your earning days are over. In a recent trend, many older adults are going back to work in some form or another to create a financial cushion. In fact, the most recent Retirement Savings and Spending Study conducted by the investment firm T. Rowe Price found that about 20 percent of retirees go back to work either part- or full-time after leaving their long-term careers. For many of these seniors, earning a passive income stream represents the ideal scenario, offering a bit of extra cash with little extra effort.
Misha Mikhaylov, CFA, a chartered financial analyst and the CEO of Llama Loan, notes that this may be easier said than done. "It's important to remember that passive income requires either a large amount of capital or work upfront before it truly becomes passive," he tells Best Life.
However, if you can find an income stream that's the right fit for your lifestyle, doing the legwork now could pay off in big ways later. Wondering how to start earning a passive income and strengthening your finances in retirement? These are the top six ways to make your money work for you.
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1 | Invest in the stock market.
iStockMikhaylov says that investing in the stock market is an "essential step" in earning a passive income in retirement. He also suggests that this is one strategy where it pays to be hands-off.
"I recommend investing in a diversified portfolio of stocks rather than picking and choosing individual companies to invest in," he says.
Taylor Kovar, CFP, founder and CEO of 11 Financial, recommends looking into exchange-traded funds (ETFs) that focus on dividend-paying stocks, as he says these can offer diversification and passive income in a single investment.
"Dividend ETFs track indexes composed of high-quality companies with a history of consistent dividend payments, providing investors with exposure to a broad range of dividend stocks," Kovar tells Best Life.
"Investing in dividend-paying stocks allows retirees to earn regular income without actively managing their investments. Companies that consistently pay dividends often have stable financial performance and can provide reliable income streams for retirees," Kovar adds.
2 | Invest in real estate.
Shutterstock / Andy Dean PhotographyAnother way to create a passive income stream is to invest in real estate, the experts say.
"There are several methods such as buying an investment property yourself, investing in crowdfunded real estate, or investing in real estate investment trusts (REITs) traded on the stock market," says Mikhaylov. "No matter which method you choose, it's critical to weigh the pros and cons of each and always crunch the numbers before investing any of your money."
Kovar agrees that real estate investments are among the best passive income opportunities for retirees, and says that rental properties can be especially lucrative.
"Rental income from tenants can provide a steady stream of cash flow, and property values may appreciate over time, offering potential long-term growth," he says.
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3 | Monetize unused space.
ShutterstockAnother way to make your real estate work for you—especially if you don't have the budget for a major property purchase—is to monetize any unused space you may already have in your own home.
Consider renting out storage space in your garage, basement, or attic; set aside certain weekends to welcome Airbnb guests to a spare bedroom; or put that extra parking space to good use, the experts suggest.
4 | Begin a product rental business.
laughingmango / iStockFor a similar strategy, you could begin a rental business that puts your own tools, sports equipment, appliances, and other rarely used items to good use in your community.
If you have the capital to invest, you can scale up your operations to rent products out for bigger events, Mikhaylov says.
"Rental businesses can be very profitable and a great way to earn passive income if you have the capital upfront to purchase your equipment. Whether you opt for a party rental business or wedding rental business, there are plenty of options out there to make money," he notes.
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5 | Monetize a hobby or passion.
ShutterstockFor more passive income inspiration, some experts recommend turning to your hobbies. For instance, if you've always loved writing, consider working on an e-book that will pay you royalties. If you were a top expert at your previous company, consider creating online content that shares your hard-earned wisdom with up-and-comers in the field.
"Think about what you've done in the past that you really enjoyed, maybe even going back to your younger days," suggests Eric Croak, CFP, president of Croak Capital. "You could revive an old hobby and blend it with your business experience to create something profitable and exciting."
6 | Open a high-yield savings account.
shapecharge / iStockFinally, placing your money in a high-yield savings account is another way to see big returns without having to lift a finger.
"High-yield savings accounts are different from regular ones because they offer much higher interest rates, sometimes 10 to 12 times higher than typical bank rates," says Croak.
"These are online accounts, and there might be requirements like maintaining a minimum balance or making a certain number of transactions each month. The interest rates can range from 4.0 percent to 5.0 percent, and they're FDIC-insured, so your money is safe," he explains.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
