Although not all real estate passive income plans are scammy, that’s not the path to retirement that I want to discuss here. If you feel up to becoming a real estate investor and renting property, I’m happy for you, but not really able to help you. What I do want to discuss is the idea of creating passive income through what we do best: writing.

Pay-Per Word or Flat Fee Writing

If you’re at all like me, most of your income from freelance writing comes in through articles or content that you are paid for on a per-word or flat fee basis. Someone says, “Write this for me.” You do it. They pay you, and you are happy. It’s a good way to make money, but not a good way to make money forever (mostly because you have to keep writing forever).

If you really stop to think about the things you are writing for clients, you might find that the work you are hired to do is actually a means to make someone else passive income. How tricky is that? Let’s say someone hires you to write an ebook or SEO articles on running a daycare from home. They then package that ebook or articles on a website with catchy sales copy and a link to pay now through PayPal. You got your one-time payment for the work, and they spend the next five years selling your work for twenty times that much money. There is virtually no justifiable reason why twenty times that money couldn’t be yours; depending on the relevance of the topic, this money could very well serve you up to retirement age and beyond.

Write a Novel, Get Royalties

For most writers (myself included), the ideal way to get passive income through writing would be by writing a novel (that is then turned into a screenplay, and a Hollywood film, and action figures, and all that other crap Harry Potter brands and packages). This is passive income at its best, especially since you get a little fame and copious amounts of money, to boot.

Writing a novel or a nonfiction book is hard work, and it’s no guarantee that you’ll get published, but if you’re already spending 40 hour a week writing, it’s really not that much of a stretch. Set aside five hours of your work week to add to your “retirement fund” by working on a book. You just might get lucky.

Ebooks and Booklets

Writing informational ebooks, booklets, and pamphlets is probably the best way to create passive income as a writer. Ebooks are huge. People love them (the good ones, anyway). They are short, easy to read, and usually fill some sort of immediate need in the lives of thousands of people willing to shell out $10-$50 to buy one.

Chances are, you’ve already written an ebook or other informational content in some capacity or another as a professional writer. I know I have. I also got a one-time payment and moved on. Although it is more work to find a designer, package the content into a format that can be sold, develop a sales platform and website, and take on the task of marketing, this can be a great way to make money without expending too much effort. Once the bulk of the work is done, it’s done.

Online Courses and Podcasts

Online educational classes and podcasts of your lovely self teaching a subject matter are another passive income option. They are very similar to ebooks in the way that you have to create the material, market it, and sell it. However, by packaging your words as an “educational opportunity,” you can reach a whole new audience. And if you really are an expert in some field, there may be the option of connecting with continuing education facilities to even offer credits for the class.

Monetized Blogs and Online Magazines

If you Google “passive income for writers,” you’ll come up with two types of options: putting ads on a website or blog and writing for an online magazine that pays you according to how popular your articles are. While these aren’t my favorite passive income choices, they do make sense. Once you write a blog or create a website with useful, relevant articles, people will start to read it. Once people start to read it, you are more likely to get companies willing to put advertisements on your site. Advertisements = money.

The same is true of those online magazine articles. Most of them (like Associated Content or eHow) offer incentives or bonuses depending on the popularity of your articles. I’ve never tried this, but I’m pretty sure that making a living this way is pretty difficult. It might be a good way to supplement an income, though.

You’re Already Doing the Work

You know how to write ebooks and SEO articles and even full-length books. I know you do. It’s just easier to do it when you are guaranteed a payment through the client who hired you and signed a contract (as opposed to doing the work and taking a risk on it paying off). However, if you aren’t a big fan of the other two retirement options I’ve covered so far, you might have to suck it up and try your hand at passive income. It’s more work now, but from what I gather, it’s a great path to more money down the road.

Well, we’ve traded all that in. We’re freelancers, and we get none of that stuff called “security” on which the older generations thrived. We’ve kicked the cubicle walls down and sacrificed our financial futures to enjoy the perks of the self-employed.

However, this doesn’t mean that there are no retirement options available to us; on the contrary, as a freelancer, you actually get quite a bit more control over your money and where it goes. While not having an employer kick in a 100 percent match rate into your 401k certainly diminishes your eventual output, all is not lost – assuming you’re planning ahead, you’re planning ahead now, and you’re planning ahead with a responsible financial advisor or banker (please, please talk with an advisor rather than taking my word for it).

SEPs

Also known as Simplified Employee Pensions, these retirement plans let you contribute up to 20 percent of your earnings (even more if you run your freelance business as a corporation). They are pretty easy to open and many banks will let you open one without paying any heavy overhead fees. The annual cap is $46,000 – which, if you’re anything like me, sounds more like an annual target income rather than a fifth of one.

Keogh Plans

Keogh Plans are pretty close to the same type of thing you get from a retirement plan in a big corporation. You come up with a figure you want to make at retirement, you make a plan to get there, and you sock away enough money each year to meet that goal. You might find yourself being required to pay the determined amount each year, which can be a drawback if you’re a freelancer and simply aren’t making that much money one year.

The annual cap is the same as the SEP ($46,000), but there are a few more steps required on your part, including the drafting of a plan and annual reports. There might also be annual fees you’re required to pay. From what I gather, this isn’t the best plan for those under the age of 50 (or freelancers in general).

Solo 401k/Individual 401k

A Solo 401k allows you to put in up to $15,500 of your annual income. Although you don’t get the benefit of an employer match to this contribution (like you do in corporate 401ks), you can also throw in an additional 20 percent of your income.

This is the ideal choice for freelancers, since there is no required annual contribution. This means that when you add on to your family and move in the same year, you don’t have to sock away a good chunk of your income to that retirement plan you set up when you were clocking a regular 60 hours per week. You also get the added bonus of withdrawing your funds or taking a loan out on your savings should money be really tight.

Roth IRA

This allows you to put in up to $5,000 annually without any fuss. You don’t get to deduct your contributions, but you don’t have to pay taxes on the interest you make (you will also get to someday withdraw all your funds without having to pay taxes at that time, either). Unlike the other plans, you can do this one in addition to another choice, thereby maximizing the amount you’re putting away in retirement savings.

I’ve Said it Before and I’ll Say it Again

Talk to someone who really knows about this stuff. These are just a few of the retirement options available to freelancers – my point is to simply let you know that you don’t have to resort to a simple savings account or stock investments just because you’re a freelancer. Uncle Sam is looking out for us, too.

At first glance, this really looks like a horrible plan. It also seems like the option too many freelancers use, if only by default or a lack of planning. Granted, you may have a savings account or wisely invested funds from your successful years as a freelancer, but unless you made plans to create self-employed 401k or you are a master of the stock market, these funds might not be enough to buy you that vacation home in Belize and still cover the cost of your medication.

Build an Empire

For other types of small businesses, working until you decide to work no more can actually be a viable plan (albeit not necessarily the smartest one). By virtue of building a business for 20 or 30 years, most small businesses develop some kind of empire. They may have a restaurant or storefront with inventory, a brand, tens of thousands of dollars worth of equipment – all the kinds of stuff that can be sold to someone interested in buying the business from you for a pretty penny.

Most freelancers don’t have this luxury, unless you can find someone who is willing to buy your client contact list for enough to pave your way to a beachside resort. And although some freelancers do build businesses with employees and a strong brand, this is most decidedly the exception to the rule.

Love the Work

However, there is an upside to simply working forever. We’re freelancers. We work from home, almost completely avoiding the exhausting routine of getting dressed for corporate jobs, commuting to an office, and working for someone else. Most of us do what we do because we love it. A lot of successful authors and Hollywood icons continue working well into their retirement years. We have to assume that they have enough money that working isn’t a necessity; therefore, they must have some desire to keep the work going strong simply by virtue of enjoying the work.

Become so Successful You’re Worth a Fortune

I have not even been a freelancer for a year, and the prices and jobs I now get are substantially greater than those I got in the beginning. From what I hear and what I read, this upward spiral will only continue to go in that deliciously vertical direction. As we freelancers age and continue doing this work, we can only become more specialized, acquire more high-quality (read: high-paying) clients, and become more selective in our choices of jobs. This lends itself to a pretty bright future.

Ideally, freelancers should be able to build themselves up for 20 or 30 years and then reduce their workloads but still command adequate prices. Or possibly even hire and train someone to do all the hard work of finding and communicating with clients (kind of like an agent), while you simply lend your style and byline. In either case, there is no reason why you can’t live in your cushy Arizona resort playing golf every day - as long as you are okay with setting some time aside each week to work.

Maybe Not

Of course, this isn’t a theory I have personally tested, but it makes sense. The only uncontrollable factor is being good enough and specialized enough to eventually command those high prices, which can actually be a pretty big gamble if you aren’t seeing a consistently upward trend as the years progress.

Although I do think this could be done with the right amount of luck, fortitude, and love of the work, I would probably combine the benefits of working until you don’t feel like working anymore with a nice, solid financial plan. Which we’ll get to next week.