How to Generate Passive Income for Retirement
If you don’t earn passive income for retirement you will work until you die.
Zero. That is the amount of money half of American households have in retirement savings. Most noteworthy, don’t be lulled into a false sense of security. You see, pension funds will not save you. Furthermore, neither will Social Security.
Passive income is sometimes called “margarita money” because you can be sitting on a beach anywhere in the world and still earn income for work you did once but still get paid for.
This article is part of a Retirement Income series. The topics are:
- Creating Retirement Income
- How Much Do I Need to Retire?
- Jobs for Retirees
- Things to Do After Retirement
- How to Retire Early
- Generating Passive Income for Retirement (this blog)
- Ideas to Boost Retirement Income
The Retirement Savings Truth
Especially relevant is the fact that nearly 40 million households, according to the National Institute on Retirement Security, have no retirement savings. No IRA. No 401K, Defined Benefit or Defined Contribution pension plan. Nothing at all.
In addition, those who have something put away for their elder years are painfully underfunded. Research conducted by the Federal Reserve indicates that the mean retirement account balance in 2016 was $60,000. That’s it. And again, that measures only those who have money set aside.
First of all let’s consider those fortunate employees who have corporate sponsored 401(k) plans. Fidelity Investments conducted a 2019 analysis of 30 million retirement accounts. The average balance was just $95,600 at the end of 2018. Consequently, that won’t last long after your paycheck stops coming in.
Yet, you may be one of the few who have taken personal responsibility. How are you doing? First of all, the average retirement savings balance in Traditional, Rollover and Roth IRAs was $98,400. In addition, $78,700 was the number for those in the non-profit sector with a defined contribution retirement account. Folks. These numbers are a wake up call.
The Pension Crisis
Worse yet is the situation of those with the “comfort” of a Government Insured Pension. Most noteworthy is that pensions are dangerously underfunded. In addition, even those that appear solvent have severe problems lurking out of sight of future retirees.
In this YouTube video Brian Reynolds provides an in depth explanation of the Unfunded Pensions & Retirement Crisis. Notably, most employees face a pitfall. It’s a lack of knowledge regarding shadow banking, the credit market, and its effect on pension plan management. Most relevant, employees are laboring under an illusion. They believe their plans are being responsibly managed. Therefore they conclude their promised benefits will be available upon retirement. That faith may be appallingly misplaced.
Pension managers frequently exhibit a herd mentality. Consequently, when one makes a misstep there is a high probability that others are exhibiting identical behavior.
Alarmingly, millions of pensioners and employees face the prospect of losing their multi-employer plan benefits. That’s because a large percentage of those plans are on the verge of failure. The repercussion of that insolvency is retirees will receive only a partial payout. Just a fraction of what they are expecting. Moreover, some will receive nothing at all. If you think we are crying wolf consider several real examples.
Already, a number of pension plans in Michigan, New York, Ohio, Oregon and Pennsylvania have had to make an unpalatable choice. Between drastic benefit cuts to stay afloat on the one hand. Or the opposite. Disintegration and failure.
According to former congressmen John Boehner and Joe Crowley America is facing a pension crisis. More than 15 plans nationwide with millions of employees have already cut benefits in half to survive. While that number is distressing, it merely represents a barometer of what’s to come.
Road Carriers Local 707 in New York is on the rocks. Hence, payments to retired truckers have already been cut in half. In Ohio, Todelo Roofers Local 134 pays only 70% of what was expected. These are just two examples of pension plans already on life support. Moreover, they represent the very tip of the iceberg. The bulk of retirees will be affected over the next five years. In conclusion, a massive number of Americans will find themselves in a dire financial position.
It seems like millions will be decimated by this crisis. Therefore, it is evident that the retirement future of a massive portion of the population is in trouble. Yes, it would be wonderful to know that our political class had the foresight, principles, integrity and determination to solve this enormous and perilous problem. However, past performance from legislators indicates little productive action .
The Root of the Problem
Public pension plans function under a legal injunction to earn an average annual return of 7.5%. As a result, that is the required rate of return required to pay the benefits that government officials have mandated. Especially relevant is retirees believe that is what their plans have done. Almost none of the plan managers have been able to meet that requirement.
Because of the large proportion of underfunded plans states have begun taking steps to raise taxes to bring more money in to address the imbalance. While not all states have done so yet California, Texas, Colorado, Michigan, New York, Pennsylvania, New Jersey, and Massachusetts have. Therefore, it’s logical to believe most other states will follow.
Social Security’s Financial Future
In addition to pension recipients, there are currently 50 million people receiving Social Security benefits. Most meaningful is that according to the Social Security board of trustees, anyone born after 1972 will not receive the full benefits they were expecting. In fact, the fund will become insolvent in 2037. That means the trust fund reserves are projected to be exhausted in 17 years. Even with the raise in tax revenue expected by the Government Accounting Office there will be sufficient taxes to pay only 75% of scheduled benefits.
The outcome of the Social Security shortfall is the trustees propose that changes be made to the program. Either an immediate 12 – 14 % increase in payroll taxes or a reduction of benefits of about 13% is what they propose to salvage the program. Furthermore, Congress has known about this pending shortfall for decades. Do you believe our politicians will act in a responsible manner to generate a solution to this problem?
Your Retirement Is Up to You
In closure, the point of the previous pension fund and Social Security disclosure is not to scare you. However, it should alert you to the truth that the sooner you begin to formulate alternatives to the standard practices of the past, the more financially secure you will become.
Passive Streams of Income to the Rescue
We at the Wealth Creation Mastermind advocate building businesses to generate passive streams of income for retirement.
What is Passive Income?
The dominant takeaway is this type of income is the financial opposite of active income. When you show up at a job and perform any kind of task or service in exchange for a pay check you are trading time for money. If the amount of money you receive is based on the amount of time you spend performing your task, the funds you receive in exchange are considered active income.
Passive income, on the other hand, is cash flow you receive over and over again without having to invest any more time. There are only two ways to create this type of income.
- Money at work
- People at work
Ways to Make Money
Passive streams of income from money at work include such things as:
- royalties from an oil or gas wells
- dividends paid for capital investments you have made
- cash flow from owning a business like a laundromat or car wash
- interest income in a savings account
- commercial real estate like shopping centers or office buildings
- industrial real estate, including warehouses and manufacturing
- residential real estate like apartments or single family homes
- fractional ownership real estate, including condo hotels
- Airbnb your unused real estate
The higher the return on your funds, the more passive income you receive. Therefore, making monthly income from money at work is a popular form of income generation. However, it requires money to make money. The good news is there is another way.
The other way is to earn passive streams of income with people at work. Affiliate marketing and network marketing are business ideas for generating income from people at work. You can build a small business or a large business. Social media, pay per click advertising, and website search engine optimization are some of the tools available to earn passive streams of income in affiliate marketing. We highly recommend you read our blog series about network marketing beginning with – What is Network Marketing?
The Value of Passive Income
Make no mistake. Passive income is transformational. When you have it you join an elite group of individuals with some common characteristics. Those shared virtues include:
This type of income appeals to those who want freedom. For the most part this select group of people have a high degree of confidence and belief in their ability to attain a goal. They are achievers, unwilling to settle for anything other than autonomy. Willing to work and daring to dream.
Achieving passive income for retirement is the ultimate way to live a lifestyle of freedom and adventure. Once you earn it you realize your most indulgent luxury is time.
The thing that distinguishes those who build income with a network marketing business is an unrelenting commitment to personal development. Growth, expansion, curiosity and mental power are driving characteristics. Financial freedom and an abundant style of living are the outward appearance of the results achieved by this group.
Those who build multiple streams of passive income are among a very select cohort who know that to transform their lives, they must transform their minds.
This is why our FREE 9-month training program, designed to help you build the income and lifestyle of your dreams, starts with teaching you to take control of your thoughts and transform your mind.
Self improvement coaches agree that commitment shows up in two places. Your calendar and your checkbook. Time, effort, dedication and sacrifice are the hallmarks of those willing to demand nothing but the best from themselves. Most devotees of personal development have set aside time daily and weekly exclusively for mental development.
Lest you have difficulty believing your ability to transform your life by transforming your mind, consider the words of Thomas Troward taken from The Dore Lectures on Mental Science.
“My mind is a center of Divine operation. The Divine operation is always for expansion and fuller expansion and this means the production of something beyond what has gone before, something entirely new, not included in the past experience, though proceeding out of it by an orderly sequence of growth. Therefore, since the Divine cannot change its inherent nature, it must operate in the same manner with me; consequently, in my own special world, of which I am the center, it will move forward to produce new conditions, always in advance of any that have gone before.”
The WCM Plan for Mental Development
One of the great distinguishing qualities of the WCM is our dedication to providing you with the tools to transform your mind into a magnet for success and abundance. Your first step for converting yourself into a prosperous entrepreneur is to know how to employ all of your mental faculties in a certain way. We have developed and offer a FREE, 9-month curriculum of study and support to aid you in this intention.
All that is required of you is time, dedication, commitment and focus. We meet online twice weekly to support everyone in their quest to become financially free and live a lifestyle of their dreams. We encourage you to take the leap of faith and become a member of the WCM,
Passive Streams of Income Roadmap
To successfully generate enough passive income to afford an abundant retirement lifestyle requires having an action plan. The benefit of membership in the Wealth Creation Mastermind is a clear plan of action to create multiple streams of passive income in a relatively short time span.
Regardless of the business you are engaged in, the likelihood for success depends on a number of factors. Chief among them is the magnitude of the problem your business solves. Followed closely by the elegance and simplicity of the solution to that problem you present to your customers.
In Napoleon Hill’s classic wealth creation tutorial Think and Grow Rich, Hill lays out a 6 step process for creating the personal financial results you desire.
- Know precisely how much monthly passive income you desire.
- Determine mentally exactly what service you will provide in exchange for the income you want.
- Be specific about the timeframe for the achievement of your goal.
- Conceive a definite action plan for building the income you would like.
- Write a clear statement that includes the amount of money you desire, what service you will perform, including the plan of daily action required to receive it, along with the timeframe for its accomplishment.
- Repeat this written statement out-loud to yourself numerous times through out the day to program your subconscious mind into a mental state of belief.
At the Wealth Creation Mastermind, we specialize in helping aspiring entrepreneurs to take these 6 steps and transform their lives. We highly recommend that you sign up as a member (it’s FREE) today.
Make the Decision
Take control of your own retirement income future. Chart your own course. Experience the exhilaration of becoming the highest and best version of yourself possible, and making a meaningful and lasting impact on the world around you. Settle for nothing but freedom, meaning and purpose.