Passive Income composite

[YellowSubmarine]

I'm not clear if you are looking for taxable income or just that income used for living expenses or sources of money for living expenses, so I'm not going to try to break this down by %. Not really interested in doing that anyway since I don't see using that information for myself.

QDivs off index funds is much of it.
A few years ago I sold off a managed mutual fund and put proceeds in Fixed Income and gradually used that base for living expenses, so I consider part of that LTCGs, and the rest return of capital. You can call it what you want, your thread.
Interest income, mostly from the above diminishing stash, so it's less each year.
A small annuity in my Roth which gets deposited monthly in my checking account. Less than 10%, and not taxed.
A small pension starts later this year and will be less than 10%.
I will be taking a large HSA withdrawal (using past receipts) this year, also not taxed.
SS will start sometime in the next 5.5 years, not this year though.
Until SS starts I will be selling more of my index funds and incur LTCGs/return of capital.
I may also withdraw from my Roth before SS starts, and later for large expenses if I want to avoid more income.

Sorry it's confusing to you. I view passive income as income arriving in my account without selling securities, transferring monies/securities, e. g. RMD or Roth Conversions, or any other sort of withdraw. Hence, that leaves us with coupons/interest, royalties, SS, dividends, pensions, and perhaps net rental income, etc. Passive is the operative word.

 

[ShokWaveRider]

Sorry it's confusing to you. I view passive income as income arriving in my account without selling securities, transferring monies/securities, e. g. RMD or Roth Conversions, or any other sort of withdraw. Hence, that leaves us with coupons/interest, royalties, SS, dividends, pensions, and perhaps net rental income, etc. Passive is the operative word.

I started a similar thread regarding passive income a few months ago. I even spelled out the requirements as much as possible. But folks here had their own rules and criticized some of my requirements and reasoning. One cannot win on this forum, one just has to run with the flow and glean what one can and simply ignore the rest.

 

[old medic]

No Roth conversions are not spendable income,

Why not? I pull $20K from my 401K and pay the tax as it is considered income... I invest it by converting to Roth... If I need some cash its there to spend.

 

[old medic]

. But folks here had their own rules.......One cannot win on this forum, one just has to run with the flow and glean what one can and simply ignore the rest.

I think thats what makes this place so great. Gives you the opportunity to look from a different perspective.

 

[HarveyS]

Yes, everyone dances to their own tune around here. But just to get into the fray, capital gains paid from a MF seems pretty passive to me, as does ROC from a fund. I have to take no action to get those $$. Net rental income, when I was collecting it, certainly took action on my part.

 

[BruinBones]

I did have some side gig income in 2025, but if we're talking just passive, then:
Pension 37%
Cap Gains 35%*
Int & Div 10%
Roth IRA 7%*
Rental 7%
tIRA 3%
*likely to go down in 2026

 

[CyclingInvestor]

91% dividends
9% social security

 

[rkser]

In year 2025, our passive income was from -

Dividends - 89%
SS x1. - 11%

 

[TheWizard]

fwiw... I don't consider Roth conversions or RMD as a passive income. In fact, it's an expense (taxes) in my book.

I agree regarding Roth conversions, but not RMDs.
Let's say you withdraw $40k per year from your tax-deferred accounts in your late 60s to make end meet.
Would that be passive income or not?

And then a few years later, age 73 or 75, RMDs now apply. Does that change that withdrawal from passive to non passive?

Bottom line: RMDs are passive income...

 

[Telly]

Interest 10.5%
Dividends 14.9%
Pensions 31.5%
Social Secur. 43.1%

Didn't include Cap Gains
No TIRA action

 

[YellowSubmarine]

I agree regarding Roth conversions, but not RMDs.
Let's say you withdraw $40k per year from your tax-deferred accounts in your late 60s to make end meet.
Would that be passive income or not?

And then a few years later, age 73 or 75, RMDs now apply. Does that change that withdrawal from passive to non passive?

Bottom line: RMDs are passive income...

Personally, in both cases I consider the withdraws from tax-deferred accounts as non passive. Passive to me is cash flow that accumulates involuntarily/automatically in my reserves with no physical withdraws. The accounts are my reserves.

 

[DEC-1982]

Given the clarification in OP post #61 stating IRA withdrawals are NOT passive income

my passive income covers only 17% of expenses

 

[target2019]

If I did not reinvest dividends, and had the realized income accumulating in a mmf, and withdrew that mmf as RMD, I would call it passive.

Another gate check is whether or not I spent the RMD on expenses?

 

[pjigar]

But just to get into the fray, capital gains paid from a MF seems pretty passive to me, as does ROC from a fund. I have to take no action to get those $$. Net rental income, when I was collecting it, certainly took action on my part.

I would go one step further: Any gains (realized or unrealized) and any dividends/distributions from any investment (stocks/bonds/real estate/partnership/etc.) where you are not actively running the enterprise is the very definition of passive income. I thought the OP's question was more about cashflows coming for the retirement spending and I answered accordingly. YMMV.

 

[pb4uski]

Interest and dividends (tax-deferred and tax-free accounts)...............56%
Social security (his and hers)..............................................................................36%
My fixed defined benefit pension......................................................................8%

And our spending, even with some BTD splurges is typically less than half of the total passive income.

 

[38Chevy454]

Pension = 16%
SS = 50%
Small Home Business = 4%
IRA Withdrawals = 20% (or whatever is needed after the three above)

edit: I don't get any regular payments out of savings. I just withdraw as required. Any dividends or distributions get reinvested.

 

[RunningBum]

Personally, in both cases I consider the withdraws from tax-deferred accounts as non passive. Passive to me is cash flow that accumulates involuntarily/automatically in my reserves with no physical withdraws. The accounts are my reserves.

Oh, I see. Nothing to do with how you make cash available for spending. It's cash generated from investments. Does that include passive income from inside IRAs? I don't see the point of trying to figure that out.

When I have cash available to invest, I look for the best rate for the time period I want to invest the money. Then I forget about it until it matures, if it's a T-Bill, bond or CD. That time period depends on how soon I might need the money or how high I think rates are now vs. what they might be in the future. I don't want to lock in money for a long term if rates seem low, and I will lock in a high rate for as long as possible unless I'll need that money sooner.

 

[YellowSubmarine]

I seen several post questioning passive income. I checked the internet, I concur with this list. I did notice SS and royalties were not included on this particular list but it's on many others. fwiw: This deals with proceeds of a transaction; but does not include the transaction per se.

1. Write an e-book
2. Sell photography online
3. Create an app
4. Create a blog or YouTube channel
5. Sell designs online
6. Buy dividend stocks
7. Set up a bond ladder
8. Invest in a high-yield CD or savings account
9. Set up an annuity
10. Try peer-to-peer lending
11. Buy a municipal bond closed-end fund
12. Invest in preferred stock
13. Create rental income
14. Buy crowdfunded real estate
15. Invest in REITs
16. Rent out your home short-term
17. Engage in affiliate marketing
18. Develop sponsored posts on social media
19. Advertise on your car
20. Flip retail products
21. Create a course
22. Rent out a parking space
23. Rent out useful household items
24. Buy a local business
25. Buy a blog

 

[Retired Expat]

About 50% rental income,
25% SS
25% dividends and interest income.

Not including here any selling of equities and such as the income question is so tied to purchase price. But getting to that point where I need to start taking RMD’s and reducing my equity exposures for more stable investments. So this is all going to move soon and will be more 40/20/20/ with that last 20 coming from selling assets and converting to bonds and such and skimming off some to enjoy our Golden Years

 

[TheWizard]

"Passive Income" seems subject to personal interpretation.
But if we go back to OP #1, he mentions not having any Earned Income in retirement. Same for me.

Earned Income vs Unearned Income is defined by the IRS and is a much cleaner demarcation, I think, especially for those of us who have been doing our own taxes for a while now...

 

[YellowSubmarine]

Oh, I see. Nothing to do with how you make cash available for spending. It's cash generated from investments. Does that include passive income from inside IRAs? I don't see the point of trying to figure that out.

When I have cash available to invest, I look for the best rate for the time period I want to invest the money. Then I forget about it until it matures, if it's a T-Bill, bond or CD. That time period depends on how soon I might need the money or how high I think rates are now vs. what they might be in the future. I don't want to lock in money for a long term if rates seem low, and I will lock in a high rate for as long as possible unless I'll need that money sooner.

I find it beneficial to know what "new money" (aka passive income) is hitting the accounts and covering expenses. Whereas, "old money" is the reserves to make up the expense short fall. Old money is basically the cost basis of all investments. New money is the passive income that is collected from the old money and from other passive sources -as my list suggest.
Benefits/points? Crunch the numbers and determine for yourself what benefits are derived from each passive category. Personal I find it good for planning as I rather see new money go after expenses rather than tapping my core, old money. Also building passive income is a major objective of income investors -as myself.

 

[L-5Player]

It would be more straightforward and (arguably) more informative to simply document where one's spending money comes from. Forget the concepts of passive and otherwise.

So you spent $100k last year. Where did that money come from?

Portfolio distributions (dividends & interest)
Liquidation of portfolio principal
Social Security
Pension
Annuity
Net rental income
Selling personal items
Wages
Gift
Etc.

Taking an IRA withdrawal in and of itself does not qualify. But the dividends and/or liquidated principal that not only left the IRA, but also got spent, certainly do.

 

[YellowSubmarine]

It would be more straightforward and (arguably) more informative to simply document where one's spending money comes from. Forget the concepts of passive and otherwise.

So you spent $100k last year. Where did that money come from?

Portfolio distributions (dividends & interest)
Liquidation of portfolio principal
Social Security
Pension
Annuity
Net rental income
Selling personal items
Wages
Gift
Etc.

Taking an IRA withdrawal in and of itself does not qualify. But the dividends and/or liquidated principal that not only left the IRA, but also got spent, certainly do.

That might be another thread. Liquidated principal is spending old money IMO. Old money is not passive; but it can create new money/passive income.
As there are some folks that cover all of those listed expenses with passive income (new money) and have some left over for investing; hence turning that new money into old money; and creating new money (dividends, coupons, royalties, etc) in the process.

 

[L-5Player]

That might be another thread. Liquidated principal is spending old money IMO.

Fair enough. It's worth noting that true passive income often doesn't add up to 100% of our outgoing cashflow. Maybe that's where some folks are getting tripped up.

Passive sources make up 41.5% of our current gross expenses. When I can tap into IRA dividends starting next year, it'll be at 108%.

 

[Out-to-Lunch]

I seen several post questioning passive income. I checked the internet, I concur with this list.

Wait, so you think that writing a book (which sounds suspiciously like work to me) is passive, but you think that capital gains on a stock are not passive? Color me confused.