What % of your FIRE expenses is (or will be) made from passive income? [Poll]

[CCCA]

I was reading a blog post on an FI blog about passive income streams, and it got me thinking that we do have passive income, but have never really calculated them as a percentage of our expenses.

So I went ahead and calculated how much of our post-FIRE expenses (when we are both fully FIRE-d) we expect to be met by passive income.  I'm defining passive income as things like pensions, royalties, rental income, etc. . . Dividends are a little tricky because they are part of the growth of the stache and it sort of seems like double-counting to count them as income, but for the purposes of this poll, we will count them as passive income.  Blogging seems like it's not entirely passive but MMM's gig is probably relatively low-effort now.  Other forms of passive income can also be included.  I'm interested both in the percentages (in the poll) but also in the forms of passive income. 

Here's our numbers right now:
rental income: 18%
dividends (not clear if this should be counted): 23%
pension (will be available in 8 yrs): ~16%
social security (not available for 20 yrs): ~30%

so we're about 41% currently if you count dividends so I put down 40-60%.  But if pension and social security are around at their expected values in the future, we are at about 87%.  This is one reason why I only model less than years in cFIREsim.

The numbers were a surprise to us, in a good way.  I hadn't really thought about trying to offset our entire spending via passive income but when you include dividends, we are starting to make a real dent in the net spending. 

[highlandterrier]

My set up always feels really complicated when I try to express in these terms as there are several stash's but here goes :

Initial fire period: ~ 1/3 from passive income of non-pension sources, DC pension should also be increasing by ~1/3 at the same time but cannot touch stash.
Pensions starts: ~2/3 from DB pension and ~2/3  DC pension/non-pension sources, giving a healthy margin for error, and some protection from both stock crashes and inflation.

I've got another small pension that starts even later which would add ~1/6, and possible Government Pensions if they are still around.

[Eric]

You immediately included rental income, but were unsure about dividends?  lol  Our definitions of "passive" must be a bit different.

[CCCA]

You immediately included rental income, but were unsure about dividends?  lol  Our definitions of "passive" must be a bit different.

When you put it that way, I can see how this sounds weird.  I think I was thinking of rental income as being real income and dividends as not really income, as I'm used to thinking of it as just investment returns (similar to cashing out of your stock as it appreciates) and focusing less on the 'passive' element.


But your probably right about questioning how passive rental income is.  I probably do about <1 hr per month on rental stuff so it feels relatively passive.

[obstinate]

I find this poll to be a little incoherent. Asset growth is much more a form of passive income than rental income. I also don't think you are actually FI if you don't make 100% of your needs via passive income (you may be RE though).

[patchyfacialhair]

I define passive income as money I hand over to an entity, and somehow someway, i get periodic income from that, without any further action.

So I would count rental income, only if it was being managed by someone else. Being an active landlord isn't very passive at all.

So to answer the poll, I'll reach FI when 100% of my expenses, including taxes and healthcare expenses, are covered by truly passive income...so probably withdrawal of dividends and growth from our portfolio.

[Nudelkopf]

How can I FIRE if my passive income doesn't cover 100% of my expenses?

[2Birds1Stone]

I would never consider rental income passive, unless you are seriously outsourcing 100% of the work and stress related to those properties.

[Acastus]

More than 100% is the assumption for the 4% rule. Your stache will make 6-8%, and you spend 4%. That way, you get a COLA.

[Acastus]

How can I FIRE if my passive income doesn't cover 100% of my expenses?

Side hustle.

[SwordGuy]

How can I FIRE if my passive income doesn't cover 100% of my expenses?

Side hustle.

Then you are still working for a living.  You may be working part time, but you are still working for a living and thus NOT financially independent.

[highlandterrier]

How can I FIRE if my passive income doesn't cover 100% of my expenses?

You can be living off your capital if you have enough. With my plan I will be comfortably FIREd, but not living entirely off passive income at first until pensions kick in.

Also, many people with pensions take out more than the passive income in the income drawdown scenario, and plan to use all their cash by a certain point in time. You could argue they are not FI as there is a risk, but then again all FI scenarios have varying degrees of risk.

[boarder42]

Equity gains and dividends are passive income. As is RE managed by someone else. Pensions and ssa are passive. RE you manage isn't passive income. You're doing something. 

[MommyCake]

I like Boarder42's definition of what is passive.  I had previously considered my rental income to be passive but learned from reading a lot of info here that that's not accurate.

So, then, are you not FI until 100% of expenses are covered by passive income?

[boarder42]

I like Boarder42's definition of what is passive.  I had previously considered my rental income to be passive but learned from reading a lot of info here that that's not accurate.

So, then, are you not FI until 100% of expenses are covered by passive income?

Who cares. You define it for yourself

[mizzourah2006]

Rental income is passive, but dividends and growth is not? I guess I’ll tell that to my father-in-law when he’s spending weekends at his rentals doing work.

[MommyCake]

I like Boarder42's definition of what is passive.  I had previously considered my rental income to be passive but learned from reading a lot of info here that that's not accurate.

So, then, are you not FI until 100% of expenses are covered by passive income?

Who cares. You define it for yourself

So this.

So much arbitrary nonsense.

Sorry.  Just trying to learn from the more experienced people here. 

[boarder42]

I'll probably always be hustling. I just enjoy making money doing little to nothing like tradelines or buying and reselling things on Craigslist. Scalping tickets etc. Do I need the money to fund my life no I just enjoy it.

[Rosy]

Equity gains and dividends are passive income. As is RE managed by someone else. Pensions and ssa are passive. RE you manage isn't passive income. You're doing something.

Here is a definition of passive income form investopedia - https://www.investopedia.com/terms/p/passiveincome.asp
which totally agrees with your definition.

It seems really weird to count SS and pensions as passive income, but I guess they are by definition. My arbitrary definition of passive income would be income generated from an investment, royalties from an invention, books, projects, music...
Things that I actively worked on in the past or perhaps inherited, which now generate an income stream.