As soon as we enter the job market, we’re confronted with the question of how we’ll use our base income to pay for retirement. Of course, jobs will likely offer the option to fund a 401k at some point, which is arguably the most traditional route toward retirement income. However, with all the new fintech options at our disposal, there are some emerging and alternative ways to fund your retirement.
In this piece, I want to look at how technology is changing the equation of retirement planning, and what advantages the tech-savvy have in this realm.
Nowadays, people are less willing to dedicate their lives to a single company and prefer more freedom over how they fund their retirement. An extreme case of that is the case of the digital nomad. In many more common cases, people fail to start retirement accounts early enough in their careers for it to be a sustainable source of funds, when it comes time to retire. For this reason, some may need to supplement their retirement income with other sources. This article will show you how different forms of technology can help provide retirement income, no matter your age.
How Technology Is Changing Our Financial Options
Most of us, regardless of age, carry mobile devices around wherever we go, whether they be laptops, smartphones, or tablets. With these devices, we have access to countless applications to help us with everyday life. In particular, we have access to financial applications that allow us to manage funds instantly and in exciting new ways.
For instance, most banks have associated smartphone apps and websites now, allowing us to conduct financial operations without needing to walk into a physical branch. Likewise, investment brokerages have associated apps for performing stock trades on the go. As a result, it’s easier than ever to manage funds on your own.
The modern state of the internet makes it easier than ever to create a website and start an online business. Services such as Squarespace and Shopify have intuitive ways of setting up shop. In addition, websites like Etsy are great for hobbyists that have physical products to sell. But digital goods are booming. In hindsight, it’s not a surprise that people have become less tethered to one fixed location, and that digital nomadism has become a popular option.
While 401ks and other retirement funds are still sound ways to prepare for retirement, there are now websites and apps that offer simple and relatively new options for those in their later years. Investing outside of a 401k can be a much more lucrative way to acquire wealth that becomes passive income for retirement.
Using Investments to Your Advantage
Passive income is a phrase used to describe ways to produce income without putting in physical or mental labor. In a sense, you’re letting your money work for you by positioning it to earn profits. Popular passive income vehicles include stock investments, real estate, and online businesses.
As mentioned before, pretty much all major stockbrokers have designed apps for mobile devices. What’s more, companies like Robinhood have reduced commission fees to zero, so the barrier to entry is far less to conduct trades. It’s now possible for the average person to set up recurring payments into stock purchasing accounts and build portfolios catered toward their own risk profile.
Some companies pay out dividends based on the number of stocks a person is holding, and this can be an excellent form of passive income with enough investment. Moreover, conservative investors may choose to put money into exchange-traded funds (ETFs), which are essentially “baskets” of stocks managed by professional fund managers. These offer safer ways to expose yourself to different industry sectors.
Real estate is another tried-and-true method of earning passive income, although it has a higher barrier to entry than stock investments. For example, you can pull out a mortgage and buy property, and using that leverage, you can wait for the property to appreciate a bit before eventually selling it. The more you’ve paid toward the mortgage loan, and the higher the property appreciates, the more equity you will earn upon selling. Or, you can choose to rent out a property that you may not be living in and earn passive income that way.
Another version of using home equity to fund retirement income is what’s called a reverse mortgage. With a reverse mortgage, you are pulling out a loan based on the equity you’ve already earned on your home, and you can use that loan to pay for everyday living expenses. The loan doesn’t need to be paid back until you’ve either sold the house or have passed away, in which case your heirs can sell the home and keep the equity for themselves.
As someone in their elderly years, managing a property might require too much involvement. Luckily, there are now apps that allow you to conveniently invest capital into real estate investments managed by a middleman. Much like buying stock ETFs, there are ways to own a fractional share of a property, allowing you to earn a percentage of the equity on it.
Finally, establishing an online business that requires little intervention is a great way to earn passive income. With adequate investment, you can set up a website and start selling digital goods and services.
If you’re a writer, or if you can hire ghostwriters, you can write affiliate marketing articles or sell ebooks. You can also sell physical products based on a brand you’ve created. Starting an online business, however, is probably better before you’re actually in retirement since it’ll take some time and momentum to be profitable.
Relying on technology and digital services may not seem like the best route to take when it comes to funding your retirement, especially if you are currently already reaching old age. But the applications out there are very intuitive and take little time to set up. Even setting up an online business can be streamlined with the help of service providers or a freelance tech-savvy digital nomad. It’s never too late to discover new sources of ongoing wealth for enjoying retirement, however early you opt to begin that chapter of your life.