My first reader posed an interesting question that I thought it would be good to share: how to generate monthly income for retirement. He was looking for ways to generate a source of income after retirement. This fits in nicely with what I was talking about in my early retirement plan.
There are obvious different ways to retire early. Most will go the route of saving enough money that can be slowly drawn down along the way. Some of it might be invested in an interest bearing instrument such as a bond or a CD. This is not my preference. I prefer my nest egg to be untouched by generating a monthly income for retirement that can be used to finance my living expenses.
When it comes to generating a monthly income, there are a couple of ways you can do it.
- Online income from blogs or websites
- Part time or free lance jobs
- Dividend income
- Stock investing (or any forms of investing)
If you have read my early retirement plan, you will know that I prefer online income from blogs or websites for the simple reason that:
- They cost very little to start
- The income can be easily maintained with only a couple of hours per week
- There is no ceiling on how much money you can generate
- The income is consistent
I am currently generating about USD1.5k USD500 through my websites and blogs. These web properties were developed in Sept of 2009. It had taken me 2 and a half years to know how to make money with them but the hard work is worth it.
Imagine if I need to earn the same amount of from method 2 to 4 above, this is what I will need:
Generate USD1.5 from part time of free lance jobs
Earning USD1.5 from a non permanent job is very possible. A few odd jobs here and there can easily achieve that. In fact, there are so many free lance jobs that doesn’t even require you to leave your home such as writing assignments, website development etc. However, the income is not passive and feels almost like any job.
- Doesn’t requirement any upfront investment
- Can be scale up according to how many hours you want to work
- The incomes stops once you stopped working
- There is a natural ceiling on how much you can earn due to limited hours in a day
- No guarantee of continuous job assignments
- Doesn’t feel like retirement
Generate USD1.5 from dividend income
An average dividend portfolio can yield between 3-7% per year. For the portfolio to yield USD1.5k per month means I need to invest USD600,000 to USD250,000. Assuming I can invest about USD1k per month, it will take me around 50 to 21 years to retire. The actual number will be less if you reinvest your dividends to buy more dividend stocks.
- Less risky portfolio when compared to generating income from websites and blogs
- Very liquid assets that can be easily sold if you need money in a hurry
- Completely passive once you have made the investments, However, efforts are required on the beginning when you do the due diligence for the dividend stocks.
- I will be more than 55 years old by the time I hit USD1.5k with dividend income. That means no early retirement.
- USD1.5k is actually not a lot of money and will not allow me to retire in comfort.
Generate USD1.5 from stock investing
I do know of stock traders who can earn much more than USD1.5k in their stock investment. However, it is a very active form of money making as they capitalise on daily news and market movements to earn their keeps. I was never a big stock investor because of the risks and the non dependable income.
- Can make lots of money within a short time frame if you know what you are doing
- Capital intensive
- High risks
- Income is not consistent unless you are able to time the market every month
- Non passive as stock investment requires a lot of your attention if you want to earn USD2.5k consistently every month
- Successes cannot be duplicated. If you bought some good investments and sold them for a profit, it is not 100% certain that you can buy such good investments again with the money that you have earned.
I prefer building websites or blogs that will generate a monthly income for me consistently once they have aged. I like it as it is semi passive and you need very little costs to get going.