Retirement planning requires regular savings and living within one’s means. While this holds true for almost everybody, not everyone saves enough to fulfill their needs and wishes by the time they retire. In such a case, delaying retirement by a few years could be one of the ways in which they might be able to accumulate a little more in their savings to last a few more years.

In the absence of enough social security, one must not ignore building some passive income sources for the later stages of one’s life. This is why it is important to plan a regular cash flow when one can no longer actively engage and exchange time and efforts in return for money.

What Is Passive Income?

Passive income is not a side income from a second job. It means any income that is generated while one is not actively devoting time and energy to earn it. Passive income is something where a one-time creation, product, or activity generates income for the first time, and every time it is used by anyone.

So full-time or part-time work is not passive income, but renting out a property, and earning interest and dividends from investments are a few examples of passive income.

Why Is It Important To Create A Source Of Passive Income?

Passive income can lead to an increase in wealth. It offers better negotiation power and a balanced mindset in case one loses a job. It also gives one the liberty to retire early if the income source is dependable.

Earning passive income needs effort, but not on a daily basis. Planning for passive income should start much before retirement because just like active income generation, this also requires time and effort, albeit mostly in the beginning.

As one may not have to work every hour to earn income, thus passive income should be a well-accepted idea for retirees who can no longer work actively.

Here are six such ways in which retirees or senior citizens can develop passive income sources.

Rental Income: Rentals are very high in the cities where there are more job opportunities. So, while constructing a house or buying a flat, one may think of the rental factor in mind whether the property can be used as an income source after retirement.

If renting out the full house or a portion of it is not possible, one can still earn money by renting out one room through a platform like Airbnb. The occasional guests would not only add to the passive income, but also new experiences and cultural exchanges, which could be interesting for retirees fighting with age-related loneliness.

Renting Out Parking: One can also rent out one’s parking space. In metro cities, where parking space is a huge issue, if one does not own a vehicle or no longer wants to use it, renting out parking space can fetch one with regular income.

Renting Out Car: Renting out a car could also be an income source for retirees who do not need to use their car regularly. Companies like Zoom Cars work in this segment where one can rent the vehicle to people who require them for one trip or for regular use. This way, one can use the car to generate income before it is rendered obsolete.

Royalty Income: Writing a book, creating an online course, or creating a product for sale can also generate income in the form of royalty. If one is inclined to spread knowledge on a subject, one may create a course and use social media to harness its full potential.

Investing In Fixed-Income Instruments: Retirees can invest in fixed deposits with banks or corporates as per their preference and risk-bearing capacity and keep earning interest without any active involvement. The government’s post office schemes with a periodic withdrawal facility can also be used for generating passive income.

Dividends From Stocks, Mutual Funds, And REITs: Though equities are risky investments for seniors, and they don’t prefer investing in it, avoiding it completely may be the extreme end. Historically, equities have given much higher returns than fixed income sources in the long term, so investment in equity instruments for earning dividends and capital appreciation may be considered as an additional source of income or passive income. Real estate investment trusts (REITs) also offer dividends and may be considered for generating regular income. These trusts invest in real estate by pooling money from investors, including individual investors, and are managed by professionals. If one is not well versed with these instruments, one may consult a financial planner or advisor for help with choosing a suitable product.

A small passive income can make a considerable difference in the portfolio size in the long years after retirement. So, while planning to create a passive income source, one should start working on it before retirement and follow anything sustainable and profitable for the best outcome.