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Building Residual Income For Retirement

written by: Jason Cox•edited by: Rebecca Scudder•updated: 12/10/2009

There are many methods to earn residual income, all of which aid in preparing for a comfortable retirement. Most will help build upon that with IRA, Mutual Funds and other forms of general investments. These help to create a nest egg, but does not create passive residual income.

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    Building Residual Income For Retirement

    What is residual Income? Residual income would be defined by the generation of income by a passive means. An example of this would be like being a landlord and collecting rent, so long as you have tenants you have a passive income.

    Many put back in the traditional 401k with their employers and that is great for retirement, however there are many other types of residual income that you should consider. For instance Real Estate, Stock Market, Mutual Funds, and Writing are a few great examples. Do not overlook though IRA's and Bonds however these are not classified as residual income they should be apart of every retirement portfolio.

    Writing:

    Most styles of these are all classified as investments, but type of residual income can be a great starting point for anyone regardless of income. Writing for some is enjoyable, and a love of their life. For those that do not have the creativity to write fiction books or stories, do not be alarmed there is another way you too can cash in on earning residual income from a book. How-To books are great, and generally have higher circulation than most other style of books.

    If how-to is not quite for you decide what you have knowledge on, or what you could do extensive research on. Most non-fiction books sell higher number of copies when compared to their creative counterparts when both are done by new authors. Regardless of how you decide to do it, books in general along with stories can be great jump starts to building your residual income, and really are not that difficult to do.

    Mutual Fund/Stock Market:

    Mutual Funds and the stock market is risky as any investment is, but can give a substantial return on your investment. Many individuals do not know the difference between the two. A mutual funds where your money is being put into a pool with hundreds perhaps thousands of others, then invested into stocks, bonds, along with other securities. You are able to diversify your portfolio to a much higher degree than you would using only your own money this way.

    Always check what their net asset value is before investing into that brokerage. Stock Markets you are using your own money to invest, but also has a much higher return with an average of 10% growth per year. To Earn residual income you want to ensure you are investing into a company though that pays dividends. This will help you to earn residual income, as you will earn the dividends at a quarterly, semi annually, or annual basis depending on the company you have invested into.

    Real Estate:

    Real Estate is another great type of residual income. This method however does demand the largest amount of initial investment. There are ways to break into real estate though without large sums of money just laying around your house. You can buy cheap houses that need some work, either do it yourself or pay someone to fix it up then rent it out. Houses from like city auctions, sheriff auctions, homes for back taxes from the city is a few great ways to get houses for much cheaper than you normally could buy them for while only requiring little to no repairs.

    The way you earn residual income with houses is simple, rent it out to those who cannot afford to buy their own house. You want to make sure that the rent your charging is enough to cover any mortgage payments you may have, while still earning a net profit from the property. After your mortgage is paid off in full then the entire rent is all profit minus perhaps some minor repairs periodically. This type of residual income is one of the most popular methods and builds up your assets toward future properties. Your first couple properties though you should just save and buy with cash if you have the ability to, that way the entire rent is profit, and you have no mortgage cutting into your profits.

    These are just a small sample of some great types of residual income to aid in ensuring you are financially set for retirement. There are plenty of other methods that you can explore into and I would highly recommend speaking with a financial planner before making any initial investments. They will be able to better look at your income, what you can invest, along with your best methods of preparing for retirement. The biggest thing to remember is start early! The earlier in life you start the better off you will be at retirement age.