When Passive Income Isn’t So Passive

The data is in, and it isn’t pretty. The vast majority of people over 50 don’t have sufficient retirement savings.  On top of that, they don’t have enough time left to save their way out of trouble.

Building enduring income streams is clearly a smart answer, as finance reporter Abby Hayes wrote in a recent piece called “4 Ways to Create a Passive Income in Retirement.”  The trouble is that what she considers passive is anything but. She suggests investing in rental property, dividend stocks and peer-to-peer lending, and also starting a side business.  All sound ideas, but all require work . . . and in some cases, as much work as a part-time job. Here’s why.

1. Rental property. If you rent a house you will actively have to work with suppliers and repair people, not to mention rental agents and tenants. Sure, you can hire a management company to find and vet tenants, collect the rent and stay on top of repairs and other issues, but you still have to manage the managers. There’s an extra schedule to file on your income tax, too, plus additional insurance to research and buy, and upkeep to do that can eat into your revenue stream.  And if you have trouble with renters, you can be looking at stiff lawyer’s fees. It can take months or longer to get rid of a deadbeat tenant, so that’s no income for however many months they’re in arrears, along with thousands of dollars to evict.
2. Dividend stocks.  Great idea, especially in this low-interest-rate environment. But deciding which equities (or funds) to invest in requires research, discipline and monitoring. Accounting work, too, at tax time.
3. Create a side business. What startup in any field is passive? If you have a weekend/evening business in retail, for example, passive isn’t even a possibility. Drive an Uber? The definition of active. Want to be a successful blogger? You will still need to put in many hours every week—plus work with editors, designers and other professionals before you can even think of generating any revenue from it.
4. Peer-to-peer lending.  If you join a lending network as an investor, you’ll still need to do the homework to decide whose loan to fund, and periodic tracking to make sure it’s working out.

The only kind of passive income streams I’m aware of involve giving your money or assets to someone else to manage for you. Except for periodic performance reviews, that’s my idea of singularly passive.  The rest, I’m afraid, requires a lot of work.

If you are older than 50 without enough set by to “retire” or support yourself for the rest of your life, no action now isn’t an option.  Certainly you can continue to save, but unless you’re saving many thousands each month you won’t have enough time to accrue what you’ll need.  Now is the time to examine the various income stream possibilities that will be best fits for you now and down the road.  You can even begin a business or rental property investment now, keep it small, and build it over time.

Not acting is what got many of us into the retirement savings hole.  Inaction now can only make matters worse.

What passive income streams have you started, or are considering starting? Let me know by leaving a comment.

Read Hayes’ full article HERE