In retirement, passive income is key. You need to make money to pay your expenses and enjoy yourself, but you may not have the energy or stamina to work like you used to. Side gigs that generate passive income are a great way to stay busy and make extra money, but how should you evaluate these side gigs? And which ones are best for retirees?
Passive Income: A Primer
Let’s start with a primer on passive income. Passive income is money that’s generated without requiring work or effort in exchange. As you’ll see, this is a bit of a misnomer since there’s no real way to make money without some kind of investment. But in retirement, it’s important to make sure your income sources are sustainable; you may not have the health or gumption to work in a physically demanding job.
If you’re only approaching retirement, you should also be aware that passive income sources are a fantastic way to build wealth. Because these income sources don’t require much of your time on an ongoing basis, you can continue working at your full-time job as you optimize your portfolio for retirement and make more accurate estimates for how much passive income you’ll be able to generate once you do retire.
While many types of investments can be considered sources of passive income, in this article, we’ll be primarily focusing on side gigs that produce passive income. In other words, we’ll mostly be looking at things you can do — rather than things you can buy.
The 3 Potential Weaknesses of Passive Income Sources
Passive income is rarely passive in the truest sense. There’s always some kind of tradeoff in play, usually from one or more of the following categories:
1. Upfront Investment
In some cases, generating passive income requires an upfront investment. You’ll need to spend a significant amount of money to purchase assets, build the foundation of your business, or pay for the things you need to make money in the long term.
2. Upfront Effort
In many cases, your passive income will require significant upfront effort. You’ll need to thoroughly research the passive income side gig, research your decisions, develop central assets, or plan and build out your business.
3. Ongoing Management
Finally, many passive income sources require at least some level of ongoing management. You may not have a schedule, and the work may not be physically intensive. Still, you’ll need to at least spend a few hours each month monitoring your passive income streams, making adjustments, and eventually rebalancing when necessary.
Side Gig Opportunities for Retirees
As we list some of the best passive income side gig opportunities for retirees, we’ll closely examine each of the three variables listed above as they relate to the gig in question.
Blogging and Vlogging
Blogging is the craft of writing articles online for public consumption. Some blogs are entertaining, while others are informative, but all blogs serve some important purpose for a niche target audience. Vlogging is very similar, but you’ll be producing videos rather than writing content.
According to The Blog Starter, starting a blog is easier than ever. Whether you use a free website builder or rely on existing templates, even people with minimal technical skills can create websites on their own. From there, it’s mostly a matter of finding the right niche and target audience. If you can produce content competently about a subject that people truly care about, you can make money from your work.
There are many ways to monetize a blog or vlog, such as through advertising, affiliate linking, or selling merchandise. Once you reach a certain threshold of popularity, your profits can multiply.
The best way to approach this gig is to treat it like a business. You’re going to have a core product, a target audience, at least a few competitors, and major strengths and weaknesses to identify along the way. The better you plan, the more money you can make.
Investing in Blogging and Vlogging
Upfront investment: Here, the upfront investment is variable but minimal compared to other side gigs on this list. If you’re just getting started, you might be able to use a free website builder and a free template to make a website for very little money. When you’re ready to upgrade, purchasing a domain, a custom template, web hosting, and other materials should still be just a few hundred dollars.
Upfront effort: This gig also requires some upfront effort. You’ll need to create a business plan, go through the steps necessary to create a website, and load your website with as many content posts as possible to give it a foundation.
Ongoing management: You’ll also need at least a few hours per week to keep your blog up and running. You’ll need to produce new content posts, market and advertise your work, engage with followers, and secure new methods of monetization. Once you’re at scale, you may be able to hire people to take care of these things for you, eventually making this truly passive.
Rental Property Management
Another opportunity is buying and managing rental properties. The idea here is to purchase a property in an attractive area, find a tenant (or tenants) who wants to live in that property and charge them rent that allows you to make a profit even after accounting for all your expenses.
You can practice this strategy with one single-family home or an entire portfolio of multi-family homes and apartment buildings. There’s a lot of flexibility here as long as you’re buying a property that’s sufficiently in demand and inexpensive relative to its income potential.
Rental property management is somewhat riskier than the other options on this list. If you buy a property in a low-demand area or if the property becomes more expensive than you anticipated, your entire profitability model could become compromised.
Additionally, you’ll be responsible for maintaining the property so that it remains livable and in good condition. Some weeks, you won’t have to do anything. Some weeks, you may face multiple emergencies. But you can often mitigate the effort necessary to practice rental property management by hiring a property management company to work for you.
Investing in Rental Property Management
Upfront investment: The biggest potential issue with rental property management is its requirement for upfront investment. Even small houses in cities with low populations can cost hundreds of thousands of dollars. If you’re taking out a loan, you’ll only need a small fraction of this, but that’s still a lot of money upfront.
Upfront effort: If you’re familiar with the real estate world already, buying and repairing a rental property shouldn’t be especially burdensome. But marketing the property, screening tenants, and getting started with new tenants can be difficult.
Ongoing management: The amount of ongoing effort needed for management here is highly variable and dependent on the condition of your property, the nature of your tenants, and pure luck. Still, if you’re willing to sacrifice a portion of your profitability, you can reduce your ongoing management needs to zero by hiring a property manager.
It’s also worth noting that if you’re interested in making money from real estate, but you don’t like the idea of buying and managing properties yourself, you could always invest in real estate investment trusts (REITs).
Dividend Stock Investing
Dividend stocks are some of the most popular investment choices for passive income, and managing your dividend stock investments functions as a kind of side gig. Shares of stock represent fractional portions of ownership in publicly traded companies, and dividend stocks are stocks of companies that have historically paid consistent dividends to their shareholders. In some cases, you can earn a reliable 4% on your investment every year — or even more.
Once you own the stock, you don’t have to do anything. You can read shareholder reports to make sure the company is doing well. You can also buy or sell shares as necessary, but for the most part, this is truly hands-off.
The demands for this passive income gig are all upfront. You’ll need enough capital to purchase the shares of stock you want. Additionally, you’ll need to do the research necessary to figure out which dividend stocks are best for your needs.
Investing in Dividend Stocks
Upfront investment: Upfront investment is the biggest drawback to consider here. If you want to make $40,000 a year from a dividend stock that pays 4 percent annually, you’ll need $1,000,000 of initial capital.
Upfront effort: Some of the strongest dividend stocks available are household names that have been around for decades, so it’s not hard to research and choose portfolio entries. You can make things even simpler by purchasing index funds that contain many different dividend stocks.
Ongoing management: This strategy requires very little in terms of ongoing management. You may have to rebalance your portfolio from time to time.
And an option similar to developing a blog, you could sell a piece of long-form content that you’ve produced. E-books are perhaps the most well-known and popularly pursued type of long-form content. But you could also make long-form educational videos or alternative forms of content.
Depending on your strategy, you may sell this content directly to consumers. Or, you may give away this content for free and monetize it in other ways. These could include hosting advertisements or selling merchandise. Like with blogging, your success will depend on your ability to target the right audience and build your business effectively.
Investing in E-book Sales
Upfront investment: You can probably produce long-form content using the tools, knowledge, and experience you already have. But you’ll likely need to spend some money on building a website, marketing your product, and establishing your foundation.
Upfront effort: Developing your piece of content (and a marketing strategy for it) is the biggest hurdle to overcome in this side gig.
Ongoing management: Once your book or alternative piece of content is published, it’s just a matter of marketing it and collecting the money.
Peer lending allows you to lend your existing money to other people via online platforms. You’ll profit on an interest rate that fluctuates based on the risk level of the borrower and the terms of your loan. Depending on how much risk you’re willing to tolerate, and what the terms of your loans are, peer lending could net you an annualized interest rate of 6% or more.
There’s always a risk that you could lose money this way. But, with some due diligence and active risk management, you can keep this risk well within your tolerance parameters.
Investing in Peer Lending
Upfront investment: This strategy mostly depends on how much money you’re willing to stake. However, you can’t lend money you don’t have.
Upfront effort: Aside from assessing your risk tolerance, evaluating borrowers, and estimating your profitability, this option doesn’t take much in the way of upfront work.
Ongoing management: There’s also very little to practice in terms of ongoing management here. You’ll need to keep an eye on your loans and periodically analyze your profitability, but that’s about it.
Online Course Education
It’s estimated that by 2027, online education is going to reach a market volume of $237.10 billion. People are always hungry to learn new knowledge, develop new skills, and improve themselves as human beings.
Let’s say you have experience in a specific field, or you feel you have knowledge that could improve people’s lives. In that case, it might be a good idea to consider developing and selling a full course. Depending on your goals, this course could include things like written content, video lectures, exercises, workbooks, and even tests.
It takes significant time, effort, and (usually) money to create this foundation. However, the long-term payoff could be worth it if you find the right niche.
Investing in Online Course Education
Upfront investment: Building a website for your online course is neither difficult nor expensive. If you already have the knowledge and teaching abilities necessary to plan, you may not have to spend much money to develop it.
Upfront effort: Here, the upfront investment of effort is the killer. In addition to creating a business plan and doing research for your course, you’ll be responsible for a few other things. These include creating all the modules, lessons, and materials necessary for your students to learn what you’re teaching. Depending on the complexity of your subject matter, it could take you months or even years to compile this information.
Ongoing management: If you’d like, you can spend ongoing time answering student questions and providing individual consultations. But this is not a strict requirement.
Finding the Best Passive Income Side Gig
As you can see, there are many passive income side gigs for current and future retirees to choose from. Whether you’re mostly interested in building wealth, securing a stable income, or just keeping your mind active, you’ll have plenty of options — so you can find the perfect fit for your needs.