How Many Streams of Wealth Do You Have? Exploring 5 Different Types of Income

Admin • August 4, 2023

One of the best (not so secret) methods to building wealth is generating multiple streams of income. This strategy can help you earn more, fight against market fluctuations, and create a better financial future for yourself. And thankfully, there are many different ways to receive income! 

 

Some methods require a large amount of your time and effort, while others can be completely passive. And there’s a whole income category in between that requires minimal or occasional effort and time.

 

If recent inflation, economic changes, and job transitions have made you nervous about where your income (and subsequent wealth) are coming from, then now is a great time to learn the many advantages of generating multiple income streams. 

 

Benefits of Creating Different Types of Income

 

Creating diverse income streams can help financially savvy investors and savers increase their financial position and future. Developing some income streams requires more knowledge, financial prowess, and dedication than others, but learning how to build multiple streams of wealth can pay off handsomely. 

 

Consider these great benefits: 

 

  • Increase your earning potential. 
  • Create flexibility to explore different careers and opportunities. 
  • Enhance your financial stability during market volatility. 
  • Reduce your liabilities.
  • Prepare for a fruitful retirement. 
  • Spend less time actively earning an income. 

 

Exploring 5 Different Types of Income

You certainly don’t have to create income from each of these categories, but it does help to understand and explore your options. Perhaps there’s something you could put in motion today that will benefit you for decades to come! Let’s start with the most common type of income: earned income.

 

1. Earned Income

This type of income can be in the form of wages where you receive an hourly rate for performing agreed-upon tasks. The more hours you work, the more money you earn. Oftentimes, working beyond 40 hours in a week results in overtime pay for additional hours. 

 

Earned income can also be in the form of salary , where you receive a set amount of money every pay period (weekly, biweekly, monthly, etc.), but you do not receive extra money for working beyond your designated work week. 

 

You can also receive earned income on a flat-rate basis , receiving a set amount of money for completing a project or task. Tips and commissions are also types of earned income. 

 

Earned income can be a predictable and reliable stream of wealth, and it’s often how most people start their working years. However, with earned income, you will always exchange your time for money . If you stop working, the income immediately stops and you’ll no longer receive income from that source when you retire. 

 

The money from earned income is also taxed quite heavily, anywhere between 10% and 37% depending on your total yearly income and filing status. As you explore other income sources, it’s usually best to keep your “day job” until you can slowly move away from exchanging your time for money. 

 

2. Profit Income

Profit income, also known as business income, can come from business ventures where you sell a product or service for more than what it costs you to produce . This can become a passive form of income in some instances, particularly if you hire out the work to a contractor or employee. 

 

This income can still be subject to hefty taxes depending on the tax structure of your business, but oftentimes, you can offset your tax liability by deducting business expenses. 

 

3. Royalty Income

Royalty income can be earned when your intellectual property gets used in commercial settings . Royalty income can come from copyrighted materials, intellectual property, licensing, patents, permissions, rights, trademarks, trade names, etc.

 

If you’re the creative type, you can turn your ideas into a steady stream of passive income by creating or developing a book, song, blog, photograph, software application, illustration, and more. 

 

The income may not be substantial at first, but if your work becomes popular and widespread, it can provide you with income without requiring more of your time, talent, and effort. Your royalty income will be taxed at your normal tax rate under miscellaneous income . 

 

4. Capital Gains Income

You can receive capital gains income when you sell an asset, such as a stock, precious metal, collectible, equity, real estate property, etc . If the selling price is higher than what you bought the investment for, then the difference is your capital gain. 

 

You only have a recognized capital gain when you sell the asset. For example, your rental property might appreciate by $100,000, but you only receive that capital gain income when you sell the property. This is called a realized gain. 

 

Assets held for less than a year are referred to as short-term capital gains and assets held longer than a year are called long-term capital gains. The IRS considers capital gains to be portfolio income and you must pay taxes on it. The amount of tax depends on your income level and whether the gain is short-term or long-term.

 

Though technically considered portfolio income, capital gains income can be a healthy stream of wealth with the right financial knowledge and planning. 

 

5. Rental Income

Rental income can be a fantastic addition to your portfolio because you can receive a consistent monthly rent payment, reduce your tax liability by deducting home maintenance costs, and own an appreciating asset . 

 

The level of active participation required from the investor in renting out a property can vary greatly. Being a landlord can be quite an active process, requiring your time, skills, and attention. If you choose to outsource this responsibility to a property management company, owning rental property can become more of a passive stream of income. 

 

To gain access to rental income, you typically need a large amount of capital and commitment to get started, but the opportunity to generate consistent income is well worth the effort.

 

Increase Your Personal Finance Knowledge with Five Pine Wealth Management

Your path to wealth and financial success is long and filled with numerous opportunities to increase your knowledge and skills. At Five Pine Wealth Management , we help our clients design a personalized financial plan, increase their financial literacy, and answer their questions along the way. 

We believe in relationship-centric service and provide excellent communication to all of our clients. If you want to hear more from us and increase your financial knowledge, sign up for our monthly newsletter !

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Rebuilding Wealth After Divorce: A Complete Guide to Your Financial Fresh Start

November 21, 2025
Key Takeaways Divorced spouses married 10+ years can claim Social Security benefits based on their ex’s record without reducing anyone else's benefits. Splitting retirement accounts requires specific legal documents (QDROs for 401(k)s) drafted precisely to your plan's requirements. Investment properties and taxable accounts carry hidden tax liabilities that significantly reduce their actual value. No one gets married planning for divorce. Yet here you are, facing a fresh financial start you never wanted. Maybe you’re 43 with two kids and suddenly managing on your own. Or you’re 56, staring down retirement in a decade, wondering how you’ll catch up after splitting assets down the middle. We get it. Divorce is brutal, emotionally and financially. And the financial piece often feels overwhelming when you're still processing everything else. According to research , women's household income drops by an average of 41% after divorce, while men's falls by about 23%. Those aren't just statistics. They're the reality many of our clients face when they first come to us. But here's something we've seen time and again: While you can't control what happened, you absolutely can control what happens next. Financial planning after divorce isn't just damage control. With the right approach, it can be the beginning of a more intentional and empowered relationship with your money. Here’s how to get there: First, Understand What You’re Working With Before you can move forward, you need a clear picture of your current financial situation. Start by gathering every financial document related to your divorce settlement: property division agreements, retirement account splits, alimony or child support arrangements, and any debt you’re responsible for. Then create a simple inventory: What you have: Bank account balances Investment and retirement accounts Home equity Expected alimony or child support income What you owe: Mortgage or rent obligations Credit card debt Car loans Student loans This baseline gives you something concrete to work with. You can't build a plan without knowing where you're starting from. Social Security Benefits for Divorced Spouses This one surprises people. If you were married for at least 10 years, you may be entitled to benefits based on your ex-spouse's work record, even if they've remarried. You can claim benefits based on your ex’s record if: Your marriage lasted 10+ years You’re currently unmarried You’re 62+ years old Your ex-spouse is eligible for Social Security benefits The benefit you can receive is up to 50% of your ex-spouse’s full retirement benefit if you wait until full retirement age to claim. Importantly, claiming benefits on your ex’s record doesn’t reduce their benefits or their current spouse’s benefits. If you’re eligible for both your own benefits and your ex’s, Social Security will automatically pay whichever amount is higher. What About Splitting Retirement Accounts in Divorce? Retirement accounts often represent one of the largest assets in a divorce settlement. Understanding how to handle the division properly can save you thousands in taxes and penalties. The QDRO Process For 401(k)s and most employer-sponsored retirement plans, you’ll need a Qualified Domestic Relations Order (QDRO). This legal document outlines the plan administrator's instructions for splitting the account without triggering early withdrawal penalties. QDROs must be drafted precisely according to both your divorce decree and the specific plan’s rules and requirements. We’ve seen clients lose thousands of dollars because their QDRO wasn’t accepted and had to be redrafted. Work with an attorney who specializes in QDROs. The upfront cost will be worth it to avoid expensive problems later. What About IRAs? Traditional and Roth IRAs can be split through your divorce decree without a QDRO. The transfer must be made directly from one IRA to another (not withdrawn or deposited) to avoid taxes and penalties. Tax Implications to Consider When you receive retirement assets in a divorce, you’re getting the account value and its future tax liability. A $200k traditional 401(k) isn’t worth the same as $200k in a Roth IRA or home equity, because of the different tax treatments. Many settlements divide assets dollar-for-dollar without considering how those dollars are taxed, so make sure yours addresses these differences. Dividing Investment Properties and Taxable Accounts Retirement accounts aren’t the only assets that require careful handling. If you own real estate investments or taxable brokerage accounts, the way you divide them matters. The Capital Gains Dilemma Let’s say you own a rental property purchased for $200k and is now worth $400k. Selling it as part of the divorce triggers capital gains tax on that gain, potentially $30,000-$60,000, depending on your tax bracket. Some couples avoid this by having one spouse keep the property and buy out the other’s share. This defers the tax hit, but you’ll want to ensure the buyout price accounts for future tax liability. Taxable Investment Accounts Brokerage accounts can be divided without triggering taxes if you transfer shares directly rather than selling and splitting proceeds. However, not all shares are equal from a tax perspective. Smart divorce settlements account for the cost basis of investments. These decisions require coordination between your divorce attorney, a CPA who understands divorce taxation, and a financial advisor who can model different scenarios. We remember a client whose settlement gave her a rental property “worth” $350,000. But the $80,000 in deferred capital gains owed when selling wasn’t accounted for. She effectively received $270,000 in value, not $350,000, a massive difference in her actual financial position. Building Your New Budget and Savings Strategy Living on one income after years of two requires adjustment. Start with your new essential expenses: housing, utilities, groceries, transportation, insurance, and any child-related costs. Then look at what’s left: this is where you begin rebuilding your financial cushion. Rebuilding Your Emergency Fund If you had to split or use your emergency savings during the divorce, rebuilding should be your first priority. Aim for at least three months of expenses, then work toward six months. Even $100 a month adds up to $1,200 each year. Maximize Retirement Contributions This feels counterintuitive when money is tight, but if your employer offers a 401(k) match, contribute at least enough to get a full match. Otherwise, you’re leaving free money on the table. If you’re over 50, take advantage of catch-up contributions. For 2025, you can contribute up to $23,500 to a 401(k), plus an additional $7,500 in catch-up contributions. If you're between 60-63, that catch-up increases to $11,250. Address Debt Strategically Post-divorce debt looks different for everyone. If you accumulated credit card debt while covering legal fees or temporary living expenses during divorce proceedings, prioritize paying these off once your settlement funds are available. Updating Your Estate Documents Updating beneficiaries and estate documents, a critical step, is sometimes overlooked. Check beneficiaries on: Life insurance policies Retirement accounts Bank accounts with payable-on-death designations Investment accounts Beneficiary designations override what’s in your will. We’ve seen ex-spouses receive retirement assets years after a divorce simply because the account owner failed to update beneficiaries. Address your will, healthcare power of attorney, and financial power of attorney, too. You're Not Starting from Zero Rebuilding wealth after divorce is about creating a financial foundation that supports the life you want to build moving forward. You have experience, earning potential, and time. It’s not a matter of if you can rebuild, but how efficiently you’ll do it. If you’re navigating financial planning after divorce, we can help. At Five Pine Wealth Management, we work with clients through major life transitions, creating practical strategies tailored to your specific situation. Call us at 877.333.1015 or email info@fivepinewealth.com to schedule a conversation. Frequently Asked Questions (FAQs) Q: Will I lose my ex-spouse's Social Security benefits if I remarry? A: Yes. Once you remarry, you can no longer collect your ex-spouse’s benefits. However, if your new marriage ends, you may claim benefits based on whichever ex-spouse's record is higher. Q: How long after divorce should I wait before making major financial decisions? A: Most advisors recommend waiting 6-12 months before making irreversible decisions like selling your home or making large investments. Focus first on understanding your new financial situation and letting the emotional dust settle. Q: Should I keep the house or take more retirement assets in the settlement?  A: This depends on your specific situation, but remember: houses have ongoing costs like property taxes, insurance, maintenance, and utilities that retirement accounts don't. We help clients run scenarios comparing both options, factoring in everything from cash flow needs to long-term growth potential, before deciding what makes sense for their situation.

401(k) Millionaire: Proven Strategies to Reach 7 Figures in Your Retirement Account

October 17, 2025
Key Takeaways Maxing out your employer match provides an immediate 50-100% return and is the easiest way to accelerate your 401(k) growth. Reaching $1 million in your 401(k) depends more on consistent contributions over time than on being the highest earner or picking winning investments. High earners can potentially contribute up to $70,000 annually through a mega backdoor Roth conversion if their employer plan allows after-tax contributions. Hitting seven figures in your 401(k) might sound like a pipe dream, but it's more achievable than you think. With the right 401(k) investment strategies and a disciplined approach, becoming a 401(k) millionaire is within reach for many mid-career professionals. Let's walk through exactly how you can get there. The Math Behind Becoming a 401(k) Millionaire Before we discuss strategies, let's look at the numbers. Understanding the math helps you see that reaching $1 million isn't about getting lucky — it's about time, consistency, and thoughtful planning. Starting Age Annual Contribution Balance at 65* 30 $15,000 $1.5 million 30 $20,000 $2 million 40 $25,000 $1.3 million *Assumes 7% average annual return Time matters, but it's never too late to build substantial wealth if you're willing to prioritize your retirement savings. 7 Steps to Build Your 401(k) to Seven Figures Now that you understand the math, let's break down the specific strategies that will get you there. Step 1: Max Out Your Employer Match (The Easiest Money You'll Ever Make) If your employer offers a 401(k) match, contributing enough to capture it fully is the absolute first step: it’s free money that provides an immediate 50-100% return on your investment. Let's say your employer matches 50% of your contributions up to 6% of your salary. If you earn $150,000 and contribute $9,000 (6% of your salary), your employer adds $4,500. That's a guaranteed 50% return before your money even hits the market. Not taking full advantage of an employer match is like turning down a raise. Make sure you're contributing at least enough to capture every dollar your employer offers. Step 2: Gradually Increase Your Contribution Rate Once you've secured your employer match, the next step is increasing your personal contribution rate over time. For 2025, the 401(k) contribution limit is $23,500 (or $31,000 if you're 50 or older with catch-up contributions). Here's a practical approach: Every time you get a raise or bonus, direct at least half toward your 401(k). If you get a 4% raise, bump your contribution by 2%. Many plans now offer automatic annual increases. If yours does, set it to increase your contribution by 1-2% annually until you hit the maximum. You'll barely notice the change, but your future self will thank you. Step 3: Master Tax-Advantaged Retirement Accounts Through Strategic Contributions Traditional 401(k) contributions reduce your taxable income now, which is ideal if you're in a high tax bracket today. Roth 401(k) contributions don't reduce current taxes, but withdrawals in retirement are tax-free — valuable if you're earlier in your career or expect a higher income later. A hybrid approach works for many of our clients. Step 4: Optimize Your 401(k) Investment Strategies Your contribution rate matters, but so does what you're investing in. We regularly see clients who contribute aggressively but choose overly conservative investments that don't provide enough growth. Keep costs low . Target-date funds and index funds typically offer the lowest expense ratios. Every 0.5% in fees you avoid can add tens of thousands to your retirement balance over 30 years. Rebalance annually . Market movements throw your allocation off balance. Set a reminder once a year to review and rebalance your portfolio back to your target allocation. Avoid the temptation to chase performance . Last year's top-performing fund is rarely this year's winner. Stick with broadly diversified, low-cost options. Step 5: Consider a Mega Backdoor Roth Conversion If you're a high earner who's already maxing out regular 401(k) contributions, a mega backdoor Roth conversion can accelerate your retirement savings. Here's how it works: Some employer plans allow after-tax contributions beyond the standard $23,500 limit. The total contribution limit for 2025 (including employer contributions and after-tax contributions) is $70,000 ($77,500 if you're 50+). If your plan permits, you can make after-tax contributions up to that limit, then immediately convert those contributions to a Roth 401(k) or roll them into a Roth IRA. This gives you tax-free growth on substantially more money than the regular contribution limits allow. Not all plans offer this option, and the rules can be complex. Check with your HR department to see if your plan allows after-tax contributions and in-plan Roth conversions or rollovers. Step 6: Avoid These Common 401(k) Mistakes Even with great 401(k) investment strategies, mistakes can derail your progress toward seven figures. Avoid: Taking loans from your 401(k) . While it might seem convenient, you're robbing yourself of compound growth. The money you borrow stops working for you, and you're paying yourself back with after-tax dollars. Cashing out when changing jobs . Rolling over your 401(k) to your new employer's plan or an IRA allows your money to continue growing tax-deferred. Cashing out triggers taxes and penalties that can set you back years. Panic selling during market downturns . Market volatility is normal. The clients who reach $1 million are those who stay invested through ups and downs, not those who try to time the market. Step 7: Stay Consistent (Even When It's Boring) The path to becoming a 401(k) millionaire isn't exciting (and that’s a good thing!). The most successful savers aren't those who constantly tweak their strategy or chase the latest investment trend. They're the ones who set up automatic contributions, review their allocation once a year, and otherwise leave their 401(k) alone. Let Five Pine Help You Build Your Million-Dollar Plan Reaching $1 million in your 401(k) is absolutely achievable with the right strategy and discipline. Whether you're just starting your career or playing catch-up in your 40s and 50s, the steps remain the same: maximize contributions, optimize your investments, take advantage of tax-advantaged retirement accounts, and stay consistent. At Five Pine Wealth Management , we help clients build comprehensive retirement strategies that go beyond just their 401(k). We can analyze your current contributions, recommend optimal allocation strategies, and help you coordinate your employer plan with other retirement accounts. Want to see what your path to seven figures looks like? We help clients build these roadmaps every day. Email us at info@fivepinewealth.com or give us a call at 877.333.1015. Let's talk about your specific situation. Frequently Asked Questions (FAQs) Q: Should I prioritize maxing out my 401(k) or paying off debt first? A: Start by contributing enough to capture your full employer match — that's an immediate 50-100% return you can't get anywhere else. Beyond that, prioritize high-interest debt (credit cards, personal loans) since those interest rates typically exceed investment returns. Q: Should I stop contributing during market downturns to avoid losses? A: No — continuing to contribute during downturns is actually one of the best strategies for building wealth. When prices are lower, your contributions buy more shares, setting you up for greater gains when the market recovers. Q: I'm 55 with only $300K saved. Is it too late to reach $1 million?  A : While reaching exactly $1 million by 65 might be challenging, you can still build substantial wealth. Maxing out contributions, including catch-up ($31,000/year), could get you to $750K-$850K depending on returns. Disclaimer: This is not tax or investment advice. Individuals should consult with a qualified professional for recommendations appropriate to their specific situation.