Ideas for Passive Income in Retirement

Passive or a semi passive income in retirement can become a reality if you take the right steps and do some research.

Following or approaching retirement and thinking about boosting your income or leaving a nest egg to your children or grandchildren is a natural thought process and we all want to do that.

You might be lucky and have a final salary pension to fall back on and if so that’s great news but final salary pensions are more or less a thing of the past now days and most other pensions are probably not enough to sustain the lifestyle you want in retirement.

If you’re still in work and haven’t drawn on your pension yet or purchased an annuity you might still have the option of increasing your contributions.

We’re assuming for this article that you’ve retired and are drawing on your pension but thinking about ways to top up that pension up.

Below are 4 ideas to consider depending on whether you want a truly passive income in retirement or are prepared to put a bit of time and effort into it for the chance of a higher return.

1. Traditional Investments (Passive if in an index)

These are normally shares and index funds and are fine for most people to consider if they’re ok with some risk and volatility. For less risk consider bonds or for a balanced portfolio consider a mixture.

The gains you make from shares will probably come from 2 routes, capital gains and interest or dividends.

With shares, it’s a good idea to invest in those that pay a dividend, although this is not always guaranteed and is paid depending on a companies profits which are sometimes cancelled if the company is not doing well.

If you go down this investment route,  ensure that to maximise returns that you always reinvest any dividends or interest you earn. This way you purchase more shares with the interest which again will pay interest or dividend on the first interest or dividend you received and so on – interest on interest.

This is called compound interest and is vital to growing a large investment pot. The power of compound interest according to Albert Einstein, is the 8th wonder of the world and Warren Buffet has virtually all of his investments in low cost index funds with the interest reinvested.

Index funds are probably safer than individual company shares as a company can go bankrupt where an index fund wont. Make sure the fund you choose is a low cost fund or else any gains you make could be swallowed up by costs. 

One of the most important elements of investing is ensuring your chosen investments is tax efficient and it’s worth planning ahead for when your wealth grows.

ISAs are often the first port of call for those looking to save tax. They are simple, flexible and tax-efficient – there’s no capital gains or income tax to pay.

The allowances for the current 2020/21 tax year are £20,000.

Always take advice from a finance professional before making any decisions.

 

2. Ads and Affiliate Marketing (Some effort initially)

This is normally done by starting a website or a blog and adding ads or affiliate banners to your blog. Whilst this does take some effort at least initially it can also be looked upon as a paying hobby especially if you base your blog around your actual hobby.

For an individual a blog is the simpler option rather than a website as there are usually less pages to look after and is normally based around one subject/interest.

passive income in retirement

                                                                                                                      Photo by Alesia Gritcuk on Unsplash

There are various ad networks like Media.net and affiliate marketing platforms like AWIN that you can tap into which will pay a commision for referring people to the advertisers website. All you have to do as a publisher is attract people (traffic) to your blog.

You can start a blog very easily and cheaply now days and you don’t even need to know about coding. Modern day blog platforms like WordPress.Com do most of the setup work for you and then you can make the site as sophisticated or as simple as you wish.

Once your blog is set up you then implement the ads into your blog and start working on attracting traffic. This shouldn’t be seen as a get rich quick scheme as it certainly isn’t.

In theory as soon as you blog or website goes live and people see it, you could earn money straight away from ads and links but normally a deal of work has to be done upfront to attract visitors to your blog.

As mentioned earlier if your blog is connected with your hobby, the work needed to be done to attract visitors should be a pleasure and not a chore.

 

3. Buy-to-let Property (Passive if using a letting agency)

There are various ways to do this and the traditional was was to buy a property and let it out hoping to make an income from the rent and hopefully a profit when it’s sold from a rise in property values.

With interest rates at an all time low this is still a great way to invest in property although the recent income tax changes on property rentals makes it slightly less attractive to some landlords.

This is not a passive income if you manage the property yourself as you will have to look after tenancy agreements and repairs etc. A simpler way would be to have a letting agency manage it for you.

 

4. Rent Out Your Driveway, Garage or Parking Space (Passive)

This is a true passive income in retirement opportunity if you live in a busy town, city or within walking distance of a train station.

Lots of people who travel into towns or cities are looking for somewhere to park their cars and then walk to the station. You can easily rent out your driveway or parking space for up to £10 per day, or up to £200 per month.

ParkLet and Just Park are 2 companies specialising in linking up sellers and buyers. Both are well established and only charge a small commission, normally under 4%.

 

Summary

It is possible to build up to having a passive income in retirement but initially at least, it does that some effort. But turning a hobby into a paying hobby is certainly worth thinking about and if done correctly is something that a couple could do together, whilst renting out your driveway couldn’t be more passive.

 



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