Even though Early Retirement is a few years’ off for Mr. ThreeYear and myself, since we plan to continue to work when we move abroad, we do plan to retire early (before we’re in our fifties and sixties), and have ever since we began our personal finance renaissance in 2008. Our current goal is to double our net worth by the end of 2019, and even if we leave those investments alone and add not another penny to them, we’d still be able to retire a few short years after that. When we do retire, we’re looking forward to the possibility of multiple streams of income to tap into.
Though Mr. ThreeYear and I primarily invest in index funds (we have a “slow and simple-don’t get greedy” philosophy), we currently plan to have several streams of income available to us when we retire. Some will be passive, and others active. While this wasn’t necessarily a conscious plan on our part, life has worked out this way and we’ll take these streams of income we’ve developed along the way.
The idea of streams of income comes from a book published in 1999 by author and (potential racketeer?) Robert Allen. I’m mostly joking when I say that, because he’s written many books over many decades, but his advice can be borderline irresponsible, get-rich-quickish methods of wealth production, such as investing in options, that I wouldn’t recommend to anyone. (Another of his gems is called Nothing Down for the 2000s: Dynamic New Wealth Strategies in Real Estate. Hmm. Wonder how many people crashed and burned from that one?) But our dear Robert actually coined the term “multiple streams of income” and his was the book that first introduced me to the idea back in the Noughts.
The book, and his ideas, were revolutionary for several reasons. First, 1999 marked the beginning of the movement of remote workers. With the recent advent of the internet, people were just beginning to explore the idea of contributing to their jobs remotely. Allen’s book took advantage of this emerging phenomenon and encouraged people to adapt to the changing world.
Second, his ideas encouraged people to break away from the idea that one job, one employer, and a fat pension at retirement were the keys to wealth production and a successful retirement. His book talks about the dangers of carrying debt, and how we must cultivate multiple ways to bring in money, especially during retirement.
There are many in the personal finance community who would disagree that we must have multiple streams of income to finance a successful retirement. And I agree that a large portfolio that generates a steady stream of revenue during retirement can, mathematically, be all that we need to have enough money during our early retirement.
But many early retirees struggle with the reality that their investment portfolios are holding steady or shrinking in retirement, rather than growing. For us, having many ways we can produce revenue will be psychologically helpful during those early retirement years. Also, if the stock market tanks during our first decade of retirement, additional income can help us avoid tapping into our investment accounts and instead spend this money first.
Here are the six main revenue streams we plan to have when we do retire:
Passive Income Sources
The first four revenue streams are (largely) passive. These all represent income that we will receive with very little effort on our parts.
- Dividend income from our taxable accounts. Part of our strategy for early retirement is growing our taxable accounts such that we can pull from them in the first part of our retirement, before we’re old enough to use our tax-free accounts. We plan to use dividend income from these accounts, trying not to draw down on the principal until necessary.
- Dividend income from our retirement accounts. Eventually, when we get old enough to pull money from these accounts, we’ll spend the dividends and stop reinvesting. The idea is to spend down as little principal as possible here, too. (Income streams # 1 and #2 will be our largest income streams, but the idea is to supplement them as much as possible so that we can largely live on dividends, rather than needing to draw on interest and principal).
- Rental income. We own an apartment in Chile. Currently, my mother-in-law lives there, but should she move in the future, to live with my brother- or sisters-in-law, this apartment will once again provide rental income for us. While it currently produces less than $1000/month in rental income, given the real estate market in Chile, we expect that amount to continue to grow. We will have a property manager overseeing the apartment, so there will be very little we’ll need to do and so consider this passive income.
- Online sales/revenue: From 2005 to 2010, I was involved in an MLM skincare business. While I don’t currently pursue it, I still earn income from products that my customers still purchase. I range from making $0-$250 per month from this business. I currently dedicate maybe half an hour a month to helping clients that still request it (that counts as passive in my mind). I don’t know if this income will continue into retirement, but so far it’s lasted seven years. It’s possible that other businesses, such as blogs or even book royalties could become income streams to replace this one.
Active Revenue Streams
The last two revenue streams represent income that requires work on our part to generate income. We may or may not utilize these income streams in early retirement, but we’ve cultivated the skills necessary to tap into these revenue streams should the need arise.
- Freelance translation: Both Mr. ThreeYear and I have worked as freelance translators in the past, and have the know-how and contacts to take on contractual freelance work again in the future. Mr. ThreeYear was trained as a translator and interpreter (English to Spanish). In his early days, he was hired by the United Nations to be an “in-the-box” interpreter–one of the people who translates what people are saying as they say it. I’ve watched him do this before and it’s incredibly impressive, and taxing–interpreters generally last about half an hour before they’re relieved by another interpreter to carry on. Translation is much “easier,” however, because we work with written documents and can utilize translation “memory,” which are sophisticated computer programs that remember what information we’ve translated in the past and apply it to our current documents. I will say that this is one field that has been changing quite a bit, due to apps like Google Translate. But we all know how important the human element still is, at least for the time being, as Google Translate can be all over the map in terms of quality.
- Freelance writing/editing: I have been a freelance writer and editor for years, especially for business-related writing and resumes. I have recently branched out into the world of freelance blog/website writing and look forward to developing this skill. I love writing so getting paid to sharpen or improve others’ writing, or share my ideas with different audiences, is my idea of a great paid hobby!
This list is by no means exhaustive, as Mr. ThreeYear and I have been hustlers and shakers our entire marriage, and have other abilities available to us. However, these are either labor-intensive or not our favorite things to do, so the chances of us pursuing these in early retirement are low. (Next week, I’ll post a list of all the side hustles we’ve pursued throughout our marriage).
For now, we’re content to pursue our main sources of employment and continue saving and investing. But it’s great to know these other streams of income will be available to us in the future. For more options and legal advice consult Goodwin Barrett.
What about you? Do you have any side hustles or favorite income-generating methods you use now or plan to use after full-time work is done?