So you want to be a millionaire? Well, setting up your passive income is key. And contrary to popular belief, most millionaires don't get there through one single windfall. In fact, the most common streams of income for millionaires during retirement are actually passive in nature.
As a financial advisor, I've learned the best ways to become a millionaire and retire like one.
So if you're looking to secure your golden years, it might be time to start thinking outside the box. Read on to learn more about the most common streams of passive income millionaires have for retirement.
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1. Dividend stocks
One common stream of passive income for millionaires is dividend stocks. Dividend stocks are stocks that pay out a portion of their earnings to shareholders in the form of dividends.
For example, let's say you own shares in a company that pays out a quarterly dividend of $0.50 per share. If you own 100 shares of that company, you would receive $50 in dividends each quarter.
Dividends can provide a steady stream of income, especially if you reinvest them into more shares of the same stock. This can help your portfolio grow over time and provide even more passive income.
2. Rental real estate
Passive income millionaires often have rental real estate. Investing in rental real estate is a great way to create passive income. When you own a property and have tenants, you're collecting rent each month—even when you're not there.
And unlike other types of investments, rental real estate tends to be relatively stable, meaning your income is more likely to stay consistent from month to month and year to year. In fact, according to one study, 35% of Americans cited rental real estate as their top choice of investment.
Plus, they're a great way to diversify your investment portfolio. There are a few things to keep in mind if you're interested in owning rental property, such as finding a great property in a good location and making sure you have the cash flow to cover your expenses.
3. Royalties and partnerships
According to financial advisors, one of the most common forms of passive income for millionaires is royalties or partnerships. These sources of income can come from a variety of different places, such as real estate, patents, and movie rights.
Musicians and writers often receive royalties from the sales of records, books, and other works. When it comes to royalties, it's important to have a solid understanding of the industry you're investing in.
For partnerships, it's key to find a good partner who shares your vision and has the same commitment to success. Whatever route you choose, make sure you do your due diligence so you can feel confident in the investment.
4. Index funds
Index funds are one of the most popular passive income investments, and for good reason. They're low-cost, tax-efficient and offer broad diversification. What's not to love?
Index funds are a type of mutual fund that track a particular market index. This could be the S&P 500, the Dow Jones Industrial Average (DJIA), or another index that reflects the broader market.
When you invest in an index fund, you're buying into a basket of stocks that mirrors the performance of the index. Index funds are considered passive investments because, once you've invested in them, you don't need to do anything else. The fund will automatically adjust its holdings to reflect the changes in the index
Financial advisors often recommend index funds for retirees looking for a steady stream of income. That's because they produce consistent returns over time, regardless of market conditions. Plus, they're a great way to preserve your capital as you draw down your retirement savings.
5. Private equity
A fifth common stream of income for millionaires in retirement is private equity. This can come in a few different forms, such as investing in a startup, buying a share in a company or becoming a silent partner in a venture.
When you invest in a startup, you're essentially giving them money in exchange for a percentage of ownership in the company. If the startup takes off and does well, you stand to make a lot of money down the road.
When it comes to buying shares in a company, this can be a great way to secure your financial future. You become a part of the company and receive regular dividends based on how well it's doing. Lastly, becoming a silent partner is another way to make money from private equity.
You invest money into the venture and collect a percentage of the profits once it's been repaid. While there's some risk involved with all of these options, they can be incredibly lucrative if everything goes according to plan.
From dividend stocks and rental real estate to royalties and partnerships, there are a variety of ways for millionaires to create streams of passive income for retirement. While some of these investments may be more complex than others, they all have the potential to help retirees achieve their financial goals.
If you're looking for a way to ensure a comfortable retirement, it's worth exploring all of your options and finding the best stream of passive income for your unique situation. If you're still stalling, it's time to stop being afraid of Investing & start building wealth