If you receive, or plan to receive, Social Security benefits, you know they will cover only a portion of your living expenses. For the rest, you need more than one source of retirement income. Part of that may come from savings, and part from passive income. The more dependable sources of money you have coming your way, the more likely you are to live comfortably in retirement.
If you're looking for passive income ideas, here are a few you can add to your list.
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1. Dividend stocks
With a current S&P 500 dividend yield of about 1.13%, dividend stocks are unlikely to make you wealthy. However, they tend to be a reliable source of passive income. You can boost your returns by focusing on stocks that have long track records of rising dividend payouts.
Several well-known companies have been making annual increases to their dividends for 25 years or more. They include companies like Target, Stanley Black & Decker, and PepsiCo. You can find dividend ETFs that concentrate on these and similar dividend-paying stocks to provide the passive income you want.
2. Real estate investment trusts (REITs)
If you've read that owning real estate should be part of your retirement plan, the advice was not wrong. However, if you don't want to mess with managing real estate, another way to get in on the action is by investing in REITs.
A REIT is a publicly traded company that owns (and better yet, manages) real estate. And because you don't have to knock on doors asking for rent payments or make emergency repairs in the middle of the night, they're a popular way to bring in passive income.
While REITs offer the benefit of being a landlord without the heavy lifting, they can be volatile. In fact, when the overall stock market swings, REITs can swing even more dramatically. If you're looking for an investment that provides a strong return when the market is healthy and that can weather downturns when it's not doing well, REITs are worth considering.
3. High-yield savings accounts and CDs
There's little to get your heart pumping when you're opening a new high-yield savings account or certificate of deposit (CD). They're not novel, like buying stock in a hot new industry, or potentially volatile, like REITs. However, each offers an incredibly stable way to earn passive income.
As of today, it's not difficult to find a CD paying a guaranteed 4% APR, and some high-yield savings accounts are paying over 4%. Both financial vehicles are FDIC insured, so you can sit back and watch your money grow without experiencing a moment of anxiety.
Whether you're already retired or planning for the day, it's never too late to find alternative sources of passive income to help smooth out any financial rough patches you come across.
