FTSE100 stocks are a great way to build a high and growing passive income in retirement. They offer the prospect of making money without much effort. However, there are risks.

How much of the second income investors receive will depend on a number of factors, from the type of shares they choose to how long they hold them.

Build long-term income

Let’s assume the investor intends to generate £777 per month, which works out to £9,324 per year. Using the 4% rule, which suggests investors can sustainably withdraw 4% of their portfolio per year without taking too much capital, they would need around £233,000 to achieve this target.

Some FTSE 100 shares offer yields of up to 8% or 9%, but these are usually at the higher end of the risk scale because companies need to generate a lot of cash to achieve this. Therefore, investors should not focus only on companies with a high rate of return. Before choosing a stock, consider whether the company is likely to maintain or raise its payments over time. Diversifying across multiple holdings reduces the risk that one disappointing payout will derail your entire plan.

Investing in a stocks and shares ISA regularly over the years increases dividends and share price growth, increasing the passive income potential of your portfolio. Even a modest crop can grow into a significant sum if given enough years. Patience, discipline and a long-term view are necessary.

HSBC is the FTSE 100 company with the highest dividend

Choosing the right stocks is key, but no one gets it right every time. Even leading companies can surprise investors.

To take HSBC Holdings (LSE: HSBA). FTSE shares Bank 100 fell 6% on Thursday (October 9) after announcing its planned £10.7 billion takeover of the bank Hang Seng Bank consolidate its presence in Hong Kong. The decline may have rattled some existing shareholders, but others may see it as a buying opportunity.

HSBC shares are doing great, up around 40% over the last year and 220% over five years, with dividends dominating. The trailing yield is a fairly well 5.1% and is forecast to reach 5.5% in 2026. Management has also been very generous with share buybacks, although this program will now be paused to finance the deal with Hang Seng. This largely explains the decline in share prices.

Long-term rewards

Still, I think HSBC seems worth considering at the moment. The stock appears to be of good quality, with a price-to-earnings ratio of just over 10. However, tensions between the US and China have flared up again, and given HSBC’s enormous exposure to Asia, it will be caught in the crossfire.

Investors also worry about an AI bubble and the risk of a broader stock market correction that would leave few stocks unscathed. Those interested may prefer to introduce money gradually rather than committing to it all at once

It may also make sense to build a balanced portfolio of about 15 to 20 dividend stocks to spread the risk. Then, most importantly, keep them for the long haul. The real benefits of investing don’t come overnight, but by sticking to your plan over the years. With any luck, when retirement comes around, this second income will start generating well.