Unearned income is defined as any income that is not acquired by providing labor or services. In other words, it includes any income that is not obtained through working for a salary or wages. Examples of unearned income sources include inherited money, interest earned on investments, dividends or capital gains earned from stocks, bonds or other investments, or money received through annuities, trusts, or Social Security payments.

Unearned income typically carries a lower rate of taxation than earned income. This is because the source of earned income, such as salary and wages, is often taxed at a higher rate than other sources, such as investments and annuities. In the US, the Internal Revenue Service (IRS) sets different tax rates for earned and unearned income.

Unearned income is a major source of income for people nearing retirement and those after retirement. It can act as additional sources of income for those who are already receiving salary and wages. This is such an important source of income for post-retirement individuals. It may be their primary source of income, depending on the type of investments they have, whether they are receiving annuity payments, and other factors.

Unearned income, when balanced and invested soundly, can play an important role in retirement security. The taxes one pays on unearned income are often lower than on earned income, providing more disposable income for retirement savings or for other uses.

In conclusion, unearned income is a valuable source of funds for those nearing retirement and those after retirement. It can be a major part of retirement security when managed and invested carefully. Unearned income, by definition, isn’t derived through labor or service, and is therefore sometimes taxed at a lower rate than earned income. Understanding the rules and regulations that dictate how these funds are taxed and how they should be invested can help individuals make the most of that income.