How to Create Residual Cash for Retirement

Retirement should be an enjoyable time in a person's life. With residual income, a person will have more resources and find meaningful pasttimes that are both productive and beneficial. Residual income is the profit above and beyond capital expenses. You should consider active and passive incomes when determining residual income streams. For example, investments and real estate can be passive residual streams, while hobbies and business are more active.

Things You'll Need

• Investment portfolio
• Start-up costs
• Calculator

Instructions

Generating Residual Income

1. Combine stocks and investments in a strong income portfolio. Beyond the traditional retirement accounts savvy investors will consider the income generated from buying and selling stocks, bonds, commodities and other types of investments. Research and invest wisely so that passive income is generated and removed from the market when needed.

2. Scan the market for potential real estate investments. Real estate is a strong investment with potential for future growth. Investments in houses, land, rentals, office space and cooperatives create additional wealth for retirement. For example, if a savvy investor bought a rental property every year at a young age and timed the pay-off of such property at his retirement he could sell a property every year to help maintain their income.

3. Create business investments that produce an income stream in retirement. Success in business doesn't mean that you must purchase the business outright. However, by purchasing ownership or partnerships in a business and allowing others to manage that business you can create residual cash into retirement. The size of the business does not need to be large, but the terms of the investment need to be well defined in order to protect your interests.

4. Produce substantial income from hobbies and the products produced from hobbies. In retirement it is beneficial to find a hobby that will keep you active and participating in the economy. These hobbies develop more meaning and purpose in retirement and provide an opportunity to earn income. For example, writing in retirement can produce additional income that would have not been realized otherwise. A retiree can consider starting a small business with the hobbies, selling paintings, consulting and many other cash-producing enterprises.

Tips & Warnings

• Understand how investments today can create residual income in retirement.

• Do not discount the potential earnings from hobbies.

References

• "Mutual Fund/Stock Market: Real Estate"; Building Residual Income for Retirement; Jason Cox; December 2009
• "Journal of Behavioral Finance"; Mitigating Investor Risk-Seeking Behavior in a Down Real Estate Market; Michael Seiler & Vicky Seiler; 2010
• "Statistics of Income Bulletin"; Sole Proprietorship Returns; Adrian Dugan; Summer 2010.