5 Ways to Create Passive Income Streams That Last Forever

What if you could wake up every morning knowing money was flowing into your bank account — without lifting a finger?

That’s the power of passive income.

And the good news is you don’t need to be rich to start building it.

Here are five ways to set up streams of income that can last for decades (or even forever).

1. Buy dividend stocks or ETFs

Dividend stocks pay a portion of company profits directly to shareholders — usually each quarter. The more shares you own, the bigger the dividend checks are.

Massive companies (think Coca-Cola and Johnson & Johnson) have paid dividends to their shareholders for decades. And these large, profitable, recession-proof companies will likely provide consistent passive income for decades to come.

But if you don’t want to pick individual stocks, another option is buying a pool of companies within a mutual fund or exchange traded fund (ETF). Dividend funds hold dozens or hundreds of dividend-paying companies, giving you wide diversification.

Yields typically range from 2% to 4% annually. So if you have $100,000 invested, your passive income could be $2,000 to $4,000 per year. While younger and still building, reinvesting those payouts can supercharge growth over time.

Probably the best thing about stock investing is you can start with very little money. Even beginning with $50 is ok, and you can buy gradually over time.

Setting up passive income is a marathon, not a sprint.

Need help starting a dividend portfolio? Check out our best stock brokers for 2025, and open an account to start building wealth today.

2. Lifetime annuities with a death benefit

A lifetime annuity is basically a deal with an insurance company. You hand over a lump sum (or a few payments), and they promise to pay you a set amount every month for the rest of your life.

People sometimes call these “single life,” “straight life,” or “non-refund” annuities.

Choosing a policy with a death benefit rider can be smart. That way your heirs will receive money if you pass away before collecting the full value. It makes this option feel less risky if you’re worried about dying too soon after you begin the policy.

Because annuity payouts depend on factors like interest rates and your age, it’s important to compare providers carefully.

3. Invest in real estate investment trusts (REITs)

REITs own large income-producing properties like apartments, malls, and office buildings. By law, they must pay out at least 90% of profits to shareholders.

This structure makes REITs one of the highest-yielding passive income investments.

Many investors use the FTSE NAREIT All Equity REIT Index as a way to track the U.S. real estate market. As of June 2025, the index had delivered an average annual return of 6.17% over the past 10 years.

You can buy publicly traded REITs through any brokerage account, just like a stock.

4. Own rental property directly

Fun fact: There was a time when I owned seven physical rental properties. I’ve since sold many of them, moving that money into index funds instead. Long story.

But buying and holding rental properties is a great long-term passive income option. Depending on the type of property and location, you can generate both monthly cashflow and grow wealth from appreciation over time.

The key is choosing homes in desirable areas where demand will stay high.

Of course, being a landlord requires work. You can hire a property manager, but expect to pay 8% to 10% of the rent.

My biggest tip for new rental owners: Treat rentals as a business, not a hobby. Keep cash reserves for repairs, screen tenants carefully, and know your local market.

5. Build a portfolio of index funds and withdraw sustainably

This one isn’t as “set it and forget it,” because it requires selling small portions of your fund over time. But it’s a powerful way to create your own “paycheck” in retirement.

The basic idea is that you invest your money broadly through low-cost index funds, then withdraw 3% to 4% of your portfolio each year. So if you had $1 million invested, you would withdraw $30k-$40k each year.

Historically, a 4% withdrawal rate has supported 30+ years of income.

Some brokerages let you automate withdrawals on a schedule. And because you’re diversified, your risk is spread across thousands of companies.

Start now, one step at a time

Building a passive income stream takes time. It’s like building a house — brick by brick, step by step, your efforts stack up over time.

The key is to just get started. Open a brokerage account, begin investing small amounts on a regular basis, and watch your income streams grow.

Ready to take the first step? Check out our list of the best online brokerages for 2025 and start investing today.