3 passive income streams that could set you up for a glorious retirement
Many retirees worry about having enough income to live comfortably -- or even cover their basic expenses. And it's easy to see why.
Recent data from Northwestern Mutual finds that the typical baby boomer has just $120,300 in retirement savings. That's not a huge sum of money over what could end up being a 20-year period or more. And while many retirees are able to fall back on Social Security, talks of benefit cuts in the future have many people worried.
That's why it's so important to set yourself up with some backup income streams. Now, you could opt to work part-time as a retiree to drum up more money, but that clearly requires some effort on your part. These investments, however, could set you up with passive retirement income so you don't have to lift a finger if you don't want to.
1. Dividend stocks
When companies pay dividends, what they're doing is sharing some of their wealth with their investors. Companies aren't required to pay dividends. And those that do tend to be more established businesses, as opposed to smaller or newer companies.
But the nice thing about dividends is that they're extra money. And many companies that pay them also tend to increase them over time.
Of course, it's not a great idea to buy shares of a given stock for the dividends alone. Rather, it's important to vet each stock you're looking at and make sure it's a solid investment. But if there's a company you've been eying that seems like a good fit for your portfolio, and it happens to pay dividends, you can enjoy extra income at a time when you might really need it.
2. REITs
Owning a rental property is a great way to generate retirement income. And while some might call that passive income, being a landlord could be a very time-consuming endeavor.
REITs, on the other hand, let you invest in real estate without having to play the role of landlord. Short for real estate investment trusts, these companies can be bought and sold like stocks. But the nice thing about REITs in particular is that they're required to pay out at least 90% of their taxable income to shareholders. So you might score some nice extra cash in retirement by keeping REITs in your portfolio.
3. Municipal bonds
Municipal bonds are those issued by cities, states, and other localities, often to fund public projects or support entities like school districts. Unlike dividends, which companies aren't required to pay, municipal bond issuers are contractually obligated to pay bondholders interest. So as a result, you get a nice, predictable income stream to enjoy.
Also, the interest municipal bonds pay is always tax-exempt at the federal level, so you won't have to worry about increasing your tax burden in that regard. And if you buy municipal bonds issued by your state of residence, you can avoid state and local taxes on that interest income, too.
It's an unfortunate thing that many retirees find themselves stressed about money. Set yourself up with these passive income streams to alleviate that concern and enjoy more financial freedom.
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