About the Passive Income Calculator
This passive income calculator answers “how much do I need invested to live off the income?”. Enter the monthly after-tax income you want, the yield or withdrawal rate your investments can pay, and the tax you expect on that income; it returns the capital required and what your current portfolio already produces.
It works for dividend investors, people building a bond or CD ladder, landlords thinking in terms of cap rates, and anyone planning to draw a steady percentage from a portfolio. A 3%–4% rate is typical for a dividend-growth portfolio or safe-withdrawal plan; 5%–7% suits higher-yield bonds or rental property.
The calculator also projects how long it takes to build that capital from your current balance and monthly contributions at an expected total return. Amounts are in today’s dollars if you use an after-inflation return.
With the default inputs, the capital needed is $1,764,705.88. Change any value above to recalculate instantly.
How to use the passive income calculator
- 1Enter the monthly income you want to receive after tax.
- 2Choose the yield your investments pay or the rate you plan to withdraw.
- 3Enter the tax rate you expect to pay on that income.
- 4Add your current portfolio, monthly contribution and expected return.
- 5Read the capital needed and how many years it will take to build.
Formula and method
The target monthly income I is grossed up for tax (divided by 1 − t) and annualised, then divided by the yield or withdrawal rate y. For example, $60,000 a year at 4% requires $1.5 million, because 4% of $1.5 million is $60,000.
Time to goal solves the future-value equation for the number of months n at which today’s balance B plus monthly contributions P, growing at the monthly total return r, reach the required capital C. The total return during the build-up phase can be higher than the income yield because it includes price growth.
- I
- Target monthly income after tax
- t
- Tax rate on the income
- y
- Yield or withdrawal rate
- B
- Current invested balance
- P
- Monthly contribution
- r
- Monthly total return while building (annual ÷ 12)
Worked examples
$5,000 a month at a 4% yield, 15% tax
Taking home $5,000 a month after 15% tax needs about $70,588 of gross income a year. At 4% that requires about $1.76 million. From $100,000, investing $1,500 a month at 7% gets there in 299 months — just under 25 years.
$2,000 a month from a 6% income portfolio, tax-free account
$24,000 a year at a 6% yield needs $400,000. The existing $150,000 already pays $750 a month; adding $1,000 a month at 6% closes the $250,000 gap in 109 months, about 9 years.
$10,000 a month at 3.5%, 20% tax
$10,000 a month after 20% tax is $150,000 of gross income a year, which at 3.5% requires about $4.29 million. From $500,000 with $4,000 a month at 8%, that takes 225 months, or 18.75 years.
Frequently asked questions
How much money do I need to live off dividends?+
Divide your yearly income need by the portfolio’s dividend yield. At a 3% yield, $40,000 a year needs about $1.33 million; at 4% it needs $1 million. Remember to allow for tax on the dividends.
How much do I need invested to make $1,000 a month?+
At a 4% yield or withdrawal rate you need $300,000 to generate $12,000 a year, before tax. At a 6% yield the figure falls to $200,000, but higher-yield investments usually carry more risk.
What yield rate should I use?+
Broad US stock indexes have yielded roughly 1%–2% recently, dividend-focused funds around 3%–4%, investment-grade bonds and CDs often 4%–5%, and rental property cap rates 5%–8%. A 4% withdrawal rate is a common rule for a diversified portfolio.
How are dividends and interest taxed?+
In the US, qualified dividends and long-term gains are taxed at 0%, 15% or 20% depending on income, while interest and non-qualified dividends are taxed as ordinary income. Income inside a Roth IRA can be tax-free.
Is passive income really passive?+
Dividend, interest and index-fund withdrawals need little ongoing work. Rental property, businesses and content income usually need management time or fees, so account for those costs when choosing your yield.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.