Passive Income Streams for Gen Xers: Boost Your Retirement Savings

As Gen Xers approach retirement, the need for a steady stream of passive income becomes increasingly important. With the oldest members of this generation turning 60 in 2025, now is the time to explore various passive income opportunities that can supplement retirement savings and provide financial security. Here are four passive income streams that Gen Xers can tap into now to enhance their retirement nest egg.

1. Real Estate Investment Trusts (REITs)

REITs offer an accessible way to invest in real estate without the need for significant capital. With an entry point as low as $500, platforms like FundRise, YieldStreet, and RealtyMogul allow investors to own a piece of a diversified real estate portfolio. REITs are particularly attractive because they have historically performed well during periods of rising interest rates, thanks to improving macroeconomic conditions. For instance, REITs posted positive total returns in 82% of months with rising Treasury yields over the period from Q1 1992 to Q4 2023. This makes REITs a low-risk investment with the potential for steady returns.



2. High-Yield Savings Accounts (HYSAs)

HYSAs are a low-risk, no-effort way to boost your income. These accounts offer higher interest rates compared to traditional savings accounts, with some HYSAs providing rates above 4%. While the average return of a typical savings account is 0.43%, according to the FDIC, HYSAs can offer a more attractive return with minimal risk. This makes HYSAs an ideal option for Gen Xers looking to grow their savings without taking on significant risk.

3. Renting Out an Additional Parking Space

If you have an extra parking space or garage, renting it out can be a lucrative passive income stream. In high-demand areas like Santa Monica, California, you can earn several hundred dollars a month by renting out a parking space. Renting a parking space for $500 per month produces a return of $6,000 per year and $30,000 in five years. This is a high-return option with no initial investment required, making it an attractive choice for Gen Xers with limited capital.

4. Investing in Rental Property

For those with more capital to invest, buying or building a rental property can be a lucrative passive income stream. If you have the space on your property and your city allows it, building an accessory dwelling unit (ADU) to rent out can provide additional income. While the property will need to be maintained, you can hire a property manager to handle maintenance requests and find tenants. Buyers can find great deals purchasing distressed properties in foreclosure or owned by the bank, which can be a wise investment while helping owners get out of debt.

Key Risks and Challenges

While these passive income streams offer attractive returns, they also come with risks and challenges. Here’s how Gen Xers can mitigate these risks to ensure a stable retirement income:

1. REITs: Rising interest rates can impact the share prices of equity REITs. However, REITs have historically performed well during periods of rising interest rates due to improving macroeconomic conditions. Additionally, many REITs have fortified their balance sheets and extended the average maturity of their debt, locking in low interest rates for years to come. Gen Xers can also diversify their REIT investments across different sectors and geographies to spread risk.

2. HYSAs: Interest rates can fluctuate with the market, potentially leading to a decrease in the return on investment. Gen Xers can choose a HYSA with a competitive interest rate and monitor the market for changes. They can also consider laddering their savings across multiple accounts with different maturity dates to take advantage of rising interest rates.

3. Renting Out a Parking Space: Local regulations or changes in demand for parking can impact the income generated from renting out a parking space. Gen Xers can research local regulations and demand for parking in their area before investing. They can also consider renting out the space on a short-term basis to take advantage of fluctuations in demand.

4. Rental Property: Property maintenance, tenant turnover, and market fluctuations can impact the income generated from rental properties. Gen Xers can hire a property manager to handle maintenance requests and find tenants. They can also diversify their rental property investments across different locations and property types to spread risk. Additionally, investing in distressed properties can provide a higher return on investment while helping owners get out of debt.

Conclusion

For Gen Xers nearing retirement, exploring passive income streams can significantly enhance their retirement savings. REITs, HYSAs, renting out a parking space, and investing in rental property are all viable options with varying initial investment requirements and potential returns. By understanding the risks and challenges associated with each passive income stream and taking steps to mitigate these risks, Gen Xers can ensure a stable retirement income and financial security in their golden years.