How to Invest $100,000 for Passive Income

When your investible assets reach the six-figure threshold, you might start wondering how to invest $100,000 for passive income. With some careful planning, you can generate thousands of dollars a year in passive income. The type of investment you choose for your $100,000 can determine the amount of passive income you can expect to earn, as well as the risk involved and the taxes involved.

If you’re looking for ways to generate passive income, consider working with a financial advisor who can help select and manage investments for your portfolio.

What Is Passive Income?

The term “passive income” has two distinct meanings. In ordinary use, it refers to money earned without effort. This distinguishes it from money earned by working at a job. Interest on savings accounts, for example, is passive income. Wages, salary, tips, commissions, bonuses and the like are not. That said passive income does typically require upfront investment, management or oversight.

The Internal Revenue Service (IRS) has another definition. To the IRS, passive income is mostly limited to income received from rental real estate and ownership interests in limited partnerships and small businesses where the owner plays no significant active role. Bank account interest, stock dividends and other income from investments is earned income, per the IRS.

The difference can matter if you lose money on something the IRS considers a passive investment. That’s because you can deduct losses from one passive investment to reduce taxable income from a profitable passive investment. This is a minor consideration for most investors, however. For most purposes, the usual understanding of passive income is good enough.

How to Invest $100,000 for Passive Income

You can approach investing $100,000 for passive income in a number of different ways, depending on your risk tolerance, liquidity needs and long-term financial goals. A diversified strategy that combines different income-generating assets can provide stability and growth while reducing risk exposure.

If you’re not comfortable investing $100,000 yourself, you also have the option of hiring a wealth manager or financial advisor to do the job for you. The investment manager will talk to you about your goals and tolerance for risk, and then develop a portfolio strategy and handle all of the buying, selling and other chores associated with the job.

Here is a closer look at some of the specific investment options you might consider for your $100k.

Dividend Stocks

Dividend-paying stocks offer regular cash payments from publicly traded companies that share profits with investors. Companies with strong financials and a history of consistent dividends, such as those in the Dividend Aristocrats index, can provide reliable income. Investors can choose between high-yield dividend stocks, which offer larger payouts but may carry more risk, and dividend growth stocks, which provide increasing dividends over time. Using a dividend reinvestment plan (DRIP) allows for compounding growth if immediate cash flow isn’t required.

Real Estate

Real estate is a popular passive income strategy, offering cash flow through rental properties, real estate investment trusts (REITs) or crowdfunding platforms. Investing your $100,000 in a rental property could provide steady rental income, though property management may require some involvement and/or additional expenses. Alternatively, REITs allow investors to earn income from real estate without owning physical property. Crowdfunding platforms like Fundrise or RealtyMogul enable fractional real estate ownership with lower capital requirements and no direct management responsibilities.

Bonds and Fixed-Income Investments

Bonds provide predictable income through interest payments, making them a stable option for passive income. Government bonds, municipal bonds and corporate bonds all offer different risk-reward profiles. Treasury bonds are low-risk but yield lower returns, while corporate bonds can offer higher interest rates depending on the creditworthiness of the issuer. Bond funds or ETFs provide diversified exposure to various fixed-income assets, helping to spread risk.

High-Yield Savings and Certificates of Deposit (CDs)

A woman reviews how to invest $100,000 for passive income.

The most convenient and safest place to put $100,000 is a high-yield savings account. These are federally insured with annual percentage yield (APY) of up to 4.5% or more (as of November 2025). That’s equal to $4,500 annually from $100,000. SmartAsset’s savings account comparison tool can help you find the highest paying savings.

Bank certificates of deposit (CDs) are equally low-risk, although less flexible. You can currently invest in CDs that earn around 4.0% in interest (as of November 2025), or perhaps even more. That’s enough to produce $4,000 in annual passive income. However, you have to be willing to lock up your $100,000 for at least a year with longer term CDs generally paying more. Like savings accounts, CDs are typically federally insured.

Still, while savings accounts and CDs are typically the most stable and safe places to put your money, they certainly won’t earn you the most impressive returns.

Annuities

An annuity is a contract with an insurance company that provides regular payments in exchange for an upfront investment. Fixed annuities offer predictable income, while variable annuities provide returns tied to market performance. While annuities can provide lifetime income, they often come with fees and surrender charges, so they may not be suitable for investors who need liquidity.

Alternative Investments

Other passive income strategies include investing in private equity funds, royalties from intellectual property or even digital assets like cryptocurrency staking. While these options can provide income, they often require higher risk tolerance and due diligence.

Royalty income meets the IRS passive income definition and is available by purchasing shares in publicly traded royalty trusts or bidding on royalty exchanges. Oil and gas fields, films, music, books and more all can generate royalties.

How to Evaluate Passive-Income Investments

Before allocating $100,000 across different income-producing assets, it helps to establish what purpose you want the income to serve. Some investors are looking for a predictable cash flow to cover ongoing expenses. Others are seeking income that they can reinvest for growth. Your timeline, liquidity needs and spending goals all will influence the mix of investments that makes sense for you.

Risk and return trade-offs are another key consideration. Dividend stocks and REITs may offer higher yields, but they can fluctuate in value. Bonds and CDs, meanwhile, provide steadier payments but typically produce lower returns. Rental real estate can generate meaningful income, yet maintenance, vacancies and management costs can affect cash flow. Reviewing the potential variability of each option can help you choose investments that match your comfort with market and economic changes.

Tax treatment also plays a role in how much income you keep. Interest, dividends, real estate income and annuity payouts are taxed differently. Some investors prefer to place income-generating assets in tax-advantaged accounts, while others prioritize liquidity in taxable accounts. Estimating after-tax income can provide a more accurate view of what each investment may deliver.

Diversification can help reduce risk. Allocating funds across different asset types such as equities, fixed income and real estate can cushion the impact if one investment underperforms. This approach can also create a more stable income stream over time.

Management requirements should also be weighed. Some passive-income assets, like rental properties or individual dividend stocks, involve ongoing decisions or oversight. Others, such as CDs, Treasury securities or certain annuities, generally require less involvement. Matching investments to the level of oversight you prefer can help you maintain a consistent strategy.

Bottom Line

A couple decide how to invest $100,000 for passive income.

Passive income that requires minimal effort from the investor is available through a wide variety of investments, ranging from ordinary savings accounts to oil and gas royalty trusts. Generally speaking, the lower the risk level, the less income a passive investment will offer. Depending on your risk tolerance and other preferences for the income stream though, it’s possible for an investor with $100,000 to bring in anywhere from $1,500 to as much as $12,000 a year from passive investments, with little or no oversight necessary.

Investing Tips

A financial advisor can help you create a passive investment portfolio that meets your needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you are looking for other sources of income, here are five ways to generate guaranteed income.