Retirement is a beautiful time to travel. You have no work deadlines, no emails pinging at all hours, no alarm clock waiting to interrupt your slumber. You can truly relax and immerse yourself in new places and experiences.
But life on the road (or the tarmac, or the rails) can get expensive. So you may be wondering how to keep your travel fund full while exploring the world.
One option to consider? Passive income.
Passive income is any money you bring in that requires little work to earn. You may have to put in some effort upfront or do a bit of maintenance along the way, but your passive income shouldn’t take up a ton of your time or energy.
If you have a 401(k) or other investments, you may already be earning passive income in the form of dividends or interest from your stocks or bonds. That’s a great start. But there are other ways to bring in cash while you travel.
1. Rent out an asset you’re leaving behind
If you’re spending weeks or months in another country, you’ll be leaving assets behind that could be making you money.
“That could be a car that you’re leaving,” said Elaine King, a Certified Financial Planner. “You’re not going to use it for three to six months,” so you may as well make some money on it.
A peer-to-peer car-sharing service like Turo or Getaround can get your car in front of potential renters. But note that you may need to have someone available to handle pickup and dropoff while you’re out of town — consider asking a friend or family member, or hiring someone to manage those details.
Renting out your home is another passive income opportunity. Airbnb and VRBO are well-established vacation rental sites, while HomeToGo is a new option on the market. You’ll need someone available to answer guest questions, greet guests (if you don’t have a keypad lock or want to offer more personal service), and clean your home between bookings.
You could also rent out your bike on Splinster, your motorcycle on Riders Share, or your grandbaby’s extra gear on BabyQuip. Think creatively and there’s probably a peer-to-peer rental market for your stuff.
2. Sell a course online or earn royalties
If you reached a high level in your career, you’re almost surely an expert in something that someone else wants to learn. Why not monetize that knowledge by writing an e-book or creating a course you can sell online? Yes, this passive income strategy requires more effort up front, but it needs little to no maintenance over time.
You can earn money from an e-book by publishing it on a platform like Amazon, or you can sell a PDF on your own website. For this strategy to work, you’ll need to tap into the right audience and market your book well, or capitalize on your existing following.
If you’d like to offer an online course, there are many places to sell it, including Kajabi, Udemy, Squarespace Courses, and Teachable. It will take some time to get organized, write your script, and record your course, but many experts make a comfortable living from their online courses. Use your platform and networks to get the word out to potential students.
“I have a course with almost 20,000 students. I just had to record once and that’s it,” King said.
3. Earn referral fees
You worked hard to build a network and connections during your career. With the right setup, you can earn money from that network in your retirement.
Consulting is certainly one way to monetize your network; it may even work for you while you’re on the road if you don’t mind fielding a few emails or Zoom calls from your hotel room. But King suggested a referral-fee system as another, more hands-off approach.
If you still regularly get asked for professional recommendations and find yourself suggesting the same contacts over and over, ask those contacts if they’d be willing to formalize the relationship and pay you a referral fee.
“Think about the network connections you have,” King said. “For example, if you’re a famous photographer, make an alliance with a famous web designer. And then every client you send, you can get a referral fee.” Another example: If you’re a retired realtor, make an alliance with an attorney or other professional in the field and earn a referral fee when you send clients their way.
A few financial considerations for traveling retirees:
Earning passive income while you sip margaritas in Playa del Carmen is all well and good so long as you’re handling that income correctly. King shared a few tips to keep in mind.
Be mindful of your taxes
King said traveling retirees should be aware of a few special tax considerations.
First, remember that earned income — such as royalties, rental income, or referral fees — is taxed differently than dividends, interest, and capital gains. Be sure each stream of passive income gets the right treatment at tax time.
Second, you will likely have to pay taxes on any income you earn abroad to the country where you earned it. So if you decide to teach English while you’re traveling, for example, or rent out your Caribbean beach house when you’re not using it, you may owe your host nation some tax dollars. (You may be able to use the taxes you’ve paid abroad as a credit on your U.S. taxes — talk to a CPA about your specific situation.)
Finally, look for any opportunity to deduct the cost of your travels on your taxes. If you’re writing a book while living in Paris, for instance, you may be able to deduct the cost of that trip. Again, talk to a CPA for help getting this right.
Don’t overstay your welcome
King also warned that many countries will consider you a resident who owes taxes if you stay someplace for more than six months. That means you may owe your host country taxes on money you’re earning in the U.S. (including your passive income) if you overstay your welcome.
“A lot of people learned that the bad way when they overstayed during COVID,” she said. People who were traveling when the pandemic hit and decided to stay or those who jetted off as soon as the borders opened often owed their host country taxes on the money they were making while they did their regular jobs remotely.
Passive income can be a wonderful way to fund your travels in retirement. Just be sure you’ve got the right team in place to help you make the most of that money.