Creating steady income streams is the key to financial stability in retirement. A recent report from the National Institute on Retirement Security found that 55% of Americans fear they can’t achieve financial security in retirement. Historically, retirees have been able to rely on pensions and Social Security for income, but times are changing. According to this year's annual Social Security and Medicare trustees report, it’s estimated that retirees will receive only 83% of their benefits beginning in 2035. With the fate of these programs unclear, it’s becoming increasingly important to generate multiple income streams of your own in retirement.
As you’re planning for retirement, it’s important to understand the difference between active income and passive income. Think of active income as an exchange. It’s the money you’ve earned in exchange for your time and services. Passive income is the opposite. It’s earned from income-generating assets, such as dividends and interest income, rental income and capital gains on stock investments or real estate.
