Trying to set aside an extra million dollars in the next 40 years so you can retire? A little overwhelmed by the concept? You're not alone, but the good news is there is a less intimidating and much more obtainable approach that will allow you to retire comfortably.

Rather than focusing on a finite savings goal that may or may not hold the same buying power by the time you retire, you can take an inflation-proof approach by focusing on income instead. Multiple income streams. And not just a mashup of Social Security with a 401(k) that you plan to cash in. We are talking about passive income that will rise in value with the economy from a variety of real estate investing avenues for the ultimate security blanket come time to retire. Follow these five steps to build a robust retirement through real estate.

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1. Buy dividend-paying REITs

Real estate investment trusts (REITs) can be an incredible way to invest in real estate without having to physically own or manage any real estate yourself. There are over 200 different public REITs to invest in across a wide range of real estate sectors, allowing you to diversify your portfolio. Plus, because of the REIT structure, these companies often pay higher-than-average dividend returns, making them a perfect addition to a retirement portfolio. Keep in mind: As with any stock, there is always a risk of a correction or crash, and because REITs invest in real estate, they are more susceptible to real estate market fluctuations.  .

2. Purchase rental properties

Rental real estate is the mecca of passive income. It's something that, if purchased properly, can result in cash flow from day one, keep up with inflation, and retain its value or possibly appreciate over time.

Rental properties do not need to take a ton of your time or constantly suck away money on repairs if your investment is structured accordingly by utilizing a property management company. Depending on how you enter the purchase, you could be earning a few hundred dollars a month on a single-family property on up to several thousand for a commercial property while you are still working. But the piece de resistance is that the renter is paying off the mortgage for you. That couple hundred extra a month can eventually turn into thousands, especially if more rentals are purchased or once the mortgage is paid off. If timed well, rental income can quickly offset your working income, giving you significant passive cash flow to retire with.

3. Create new income through mortgage notes

Mortgage notes are an additional and diversified income stream to utilize. Rather than owning and leasing a property, you simply act as the bank, lending money to someone else as they purchase a property and having them pay you back through a mortgage over time. 

You can create mortgage notes from properties you own or through private lending, or purchase existing ones from other sellers, generating new avenues of income. However, it's important you fully understand the risks and due diligence involved in creating or purchasing mortgage notes, including the possibility of having to foreclose if the borrower stops paying.

Single family home with well-manicured lawn.

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4. Pay down your personal residence

It doesn't necessarily need to happen early, especially if you have a low-interest fixed-rate mortgage. But planning ahead so that your mortgage will be paid off by the time you retire definitely counts as a sound investing move.

Many retirees aim to have enough passive income to pay for their ongoing expenses, such as a mortgage. Rather than working harder to create more income streams, however, you can reduce the financial burden via eliminating expenses; one way is by paying off your mortgage early. That means being cautious of refinancing or pulling an equity line to fix up the house. It can be beneficial to do that depending on your scenario, but that type of decision should be considered from all angles and with the end goal in mind.

5. Turn your retirement home into a vacation rental

If you're going to be purchasing a second home anyhow, you might as well have it work for you in the meantime.

Vacation rentals, especially if they are in a touristy or frequently visited area, will typically earn a premium per night compared to a normal rental. Use the additional income stream to pay down the mortgage so that when you're ready to retire, you won't have a mortgage to worry about, which reduces the amount of passive income needed to live comfortably.

As a bonus, when you own a vacation rental, you can still easily block off the time that you would personally like to spend at the residence. It's a win-win.

Real estate is a wonderful way to generate diversified income streams that have historically kept pace with inflation and other market corrections. And because these streams can be structured as passive income, they can easily be held into retirement without demanding large amounts of your time. The significant potential income from real estate is one avenue you can take to replace your working income so you can retire and live the life you envision.