Book argues passive income can liberate you from work and ease you into retirement

October 20, 2022

What if you had enough income from passive sources – investments, rental income, coin-operated machines, and royalties – that you no longer needed to have a job for income?

That’s the theory behind the book Passive Income, Aggressive Retirement by Rachel Richards, who sets out a detailed and very creative “how-to” gameplan on ways to create sources of passive income.

She begins by asking us to imagine “a world that makes no demands of you. You don’t have to worry about money…. You can hop on a plane tomorrow and go to Costa Rica if that’s what your heart desires.”

People traditionally don’t think of building passive income sources (while they are younger) as a way to achieve financial independence, she writes. Instead we are counselled to save lots of money – say $2 million – to retire by 65. She cites CNBC as reporting that “one in three Americans have less than $5,000 saved for retirement,” with boomers (on the precipice of retirement) having only $24,000 and change saved.

Richards writes that she and her husband have set up $10,000 in monthly passive income. Since reaching age 27 she no longer works for wages, and her husband only works remotely when he feels like it. “We are free,” she exults, adding “words can’t describe the liberation and joy we feel every day.”

Before rolling out ways to create sources of passive income, Richards spends time on why the “nest egg” approach of saving for retirement that may have worked in the past is not as suitable for today. It’s because the nest egg approach, she writes, which worked in the 1950s, does not factor in increases in household expenses, lifestyle pressure, life expectancy, government benefit adequacy, pensions (the lack of them), rising education costs and the increased hourly work week.

Few people can save the $2 million experts recommend. And there’s less help from employers than there was in the past, she explains.

“Pensions are quickly becoming a thing of the past,” she writes. “The ones that still exist today aren’t even that great.” She notes that in the USA and elsewhere, defined benefit pensions that offered a guaranteed monthly income have been replaced by capital accumulation programs without any such guarantees.

So, what’s the alternative to the nest egg approach? It’s passive income, regular income “that is maintained with little or no work. Passive income is the key to being free: freeing up our time, freeing up the location we must be in, freeing up our lives from being financially dependent on our employer.”

The main types of passive income out there, she writes, are “royalty income, portfolio income, coin-operated machines, ads and e-commerce, and rental income.”

Royalty income, she explains, is generated for authors of books and eBooks, composers of music, through loading photos onto a stock photo website, creating downloadable or print-on-demand content, creating online courses, developing an app or software, franchising something, and mineral rights.

We have a friend who writes plays for a publisher. He gets paid every time the play is performed, and the more he writes, the more royalties he gets. The same concept works for other shareable content, the book explains.

The book provides detailed “how-to” steps on how to get going on any or all of these potential revenue streams. Very creative stuff.

On the investment side, you can get passive income from stocks, via dividends, and bonds. With stocks, she writes, “the higher the dividend yield, the higher the risk.” Rather than putting all your eggs in one basket, you might want to look at “a dividend-yielding exchange-traded fund (ETF).”

On bonds, she notes that in the past, bonds offered double-digit yields and were a simple way to make a strong income. She notes that you’ll get regular interest with a bond and its face value in the end “only if you hold it until maturity.” If you sell it before it matures, you could lose money (or gain). Bond ETFs are a way to go if you again don’t want to have all your bond investments in a single company, she continues.

Real Estate Income Trusts (REITs) “are a great way to get your feet wet with investing in real estate. You can earn a piece of the pie without actually buying a property,” she explains.

Coin-operated vending machines can cost a lot, but once you invest in one, it’s a steady source of cash. “Location, location, location,” she advises, also noting that an older machine can be more affordable than a fancy new one with tap payment and other high-tech perks.

If you are in the position to go even bigger on coin-operated ventures, carwashes and laundromats are a very reliable investment that generates predictable cash flow, she explains.

On rental properties (including rental of rooms), the book notes that it’s a steady source of income. If, she explains, you were able to rent out a single-family property for $250 more than the mortgage, “then you are making $250 a month while your tenant pays your mortgage for you.” Once the mortgage is paid, “your cash flow jumps by hundreds of dollars.”

This is a very different way to look at retirement. In effect, Richards is advocating the idea of gradually replacing your work salary with various sources of passive income, until such time as you don’t need to work. We haven’t seen a book that looks at things quite this way – it’s well worth a read.

The book mentions that the traditional defined benefit pension is scarce these days. Did you know that your Saskatchewan Pension Plan account offers you the option of a lifetime, guaranteed monthly payment via one of several different annuity options? It’s how SPP can a reliable generator of passive income for the rest of your life! Check out SPP today!

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Aggressive Retirement, CNBC, ETF, exchange-traded fund, Passive Income, Passive Income Aggressive Retirement, Rachel Richards, Real Estate Income Trusts, REIT

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