The 19 Sources of Retirement Income: Royalty Payments
In this episode, John continues his series on the 19 Sources of Retirement Income, discussing the part that royalty payments and income can play in your retirement plan.
Don’t miss John’s takeaways:
- Royalty income derives from allowing someone else to use your property.
- Most commonly, you receive royalties from companies that are exploiting oil, gas, or other natural resources on the properties for which you own the mineral rights.
- Although they are usually taxed as ordinary income, these income sources have unique tax benefits, such as deductions for depreciation or depletion.
- If you don’t own such assets yourself, you can benefit from them by participating in investments that generate income from oil, gas, and minerals.
- Although they are sometimes high risk, these investments can nevertheless generate significant income and significant tax benefits.
- You can invest with one or more partners, pooling your assets to create a more efficient amount of money and proportionately lower fees. Partnership income has its own tax benefits as well.
- Royalties are also a multigenerational source of income that you can pass to your heirs.
- As you plan for retirement, ask yourself:
- How can I get some of this royalty income into my plan?
- What percentage of my income should it be?
- Will the rewards outweigh the risks?
Royalties may end up being a low percentage of your overall income, but they can provide sustainable long-term income.
For more on royalty income, listen above. Then download our 19 Sources of Retirement Income and find out more.
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