Yahoo Finance 6 Richest Extra Income Sources If You Want To Retire Early
While retirement has often been associated with something you do in your later years, there has been a movement toward early retirement in the last few years. You don’t have to wait until you’re 65 to leave your job and enjoy your life because you can embrace the early retirement philosophies. The good news is that if you want to retire earlier than initially anticipated, there are extra income sources that will help you.
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Retiring Early Considerations
As you search for extra income sources to supplement your investments and savings and help you retire sooner, there are a few key points worth considering.
Look For Passive Income Streams
“Passive income sources are essential for those aiming to retire early as they provide ongoing income with minimal active involvement,” according to Tyler Meyer, CFP® and founder of Retire To Abundance.
If you want to retire earlier, you’ll need to ensure that you have the funds to cover your bills so you don’t have to stress out about this.
“Invest in assets that generate passive income, such as rental properties, dividend-paying stocks, or peer-to-peer lending platforms,” added Seth Diener, private wealth manager at Diener Money Management LLC. “Passive income streams can supplement your primary income and contribute to your retirement savings without requiring active involvement.”
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You Have To Switch Your Investing Style
“Consider investing in stocks, bonds, mutual funds, or exchange-traded funds (ETFs) to grow your wealth over time,” Diener said.
The goal is to switch up how you’re investing if you want to speed up the process of exiting the workforce. You may have to take on some risks by looking for ways to ensure your money grows faster. You might also want to think about working with a financial advisor to make a customized plan for your situation.
Diversification Is Crucial
“Diversification is important because it’s vital to spread your investments and savings out among multiple assets and investment vehicles to manage risk more effectively,” shared Ben McLaughlin, a personal finance expert at Raisin. “Diversification may help your portfolio weather financial storms because if one asset is doing poorly, another might still be doing well, so you have better stability for your financial future.”
As tempting as it can be to go all in on one investment, it helps if you spread out your risk so that you’re not relying on one asset class to fund your lifestyle.
Extra Income Sources To Retire Early
Here’s a look at some income sources that can help with early retirement.
1. CD Ladders
“The ladder strategy is a method to secure the most attractive fixed interest rates over a time period of rising rates,” according to McLaughlin. “Consumers begin with the amount they wish to invest and break it down into smaller amounts, then purchase multiple CDs at varying increments of time.”
How does this work? McLaughlin added:
“For example, someone looking to invest a sum of $10,000 could split that into $2,000 lumps and invest in 5 fixed-rate CDs with terms of 1, 2, 3, 4, and 5 years. After the first year, the initial investment amount (including accrued interest) is paid out and can be invested again at the highest interest rate available. Then the following year, the two-year term deposit is due, and so on. The great thing about CD laddering is that it gives one the opportunity to benefit from a high interest rate and maximize their return when rates change.”
Why should you consider a CD ladder? McLaughlin concluded:
“CD laddering is a great option for people as they get closer to retirement because of their liquidity and stability. Cash savings are important, especially in retirement, because there’s no risk. Your CDs are federally insured and guaranteed to earn interest over time. This stability is paramount in retirement when most people are on fixed incomes.
2. Invest In Real Estate
“Real estate investments can provide steady income and long-term appreciation potential, contributing to your early retirement goals,” Deiner said.
If you want to retire early, you’ll want multiple income streams and opportunities for future cash flow. Purchasing an investment property could provide you with a monthly income to cover your expenses in retirement. If your property appreciates enough, you can also sell it to add more funds to your retirement accounts.
3. Real Estate Crowdfunding
“Real estate crowdfunding platforms allow investors to pool resources and invest in diverse real estate projects, providing passive income without the hassle of property management,” Meyer said.
If you’re not ready to become a landlord, you can invest in REITs or crowdfunded projects to help you find better returns for your money.
4. Dividend Paying Stocks
“Dividend-paying stocks provide regular income payments to shareholders, making them a reliable source of passive income for early retirees,” Meyer said.
The good news is that you can use the other income streams in this article to add to your investment accounts to have more to invest in dividend-paying stocks.
5. Freelance Work
“Freelancing gigs are valuable income sources for individuals looking to retire early,” Meyer said. “Leveraging skills or hobbies to generate additional income can significantly boost savings and investment accounts.”
What are examples of freelance work?
“Whether it’s freelance writing, graphic design, consulting, or tutoring, the gig economy offers a plethora of opportunities to earn extra income outside of traditional employment,” Meyer added.
6. Passion Projects/Side Hustles
“Monetize your hobbies or passions by turning them into income-generating activities,” Diener said. “Whether it’s selling handmade crafts, teaching workshops, or monetizing a blog or YouTube channel, pursuing activities you enjoy can provide fulfilling sources of additional income.”
While a side hustle differs from a freelance job, both are excellent income streams worth pursuing if you want to replace your full-time gig sooner.
Closing Thoughts
“It’s essential to assess your risk tolerance, financial goals, and personal preferences when considering additional income sources,” Diener said.
“You should consider your threshold for risk, how close you are to your desired retirement date, and how much financial wiggle room you have before proceeding,” McLaughlin added.
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This article originally appeared on GOBankingRates.com: 6 Richest Extra Income Sources If You Want To Retire Early
