Comprehensive Guide
Learn more in our Personal Finance Guide.
How it works
Passive income is capital multiplied by yield, and this calculator runs the equation in both directions. Forward: enter your invested capital and an annual yield, and it shows the income that capital throws off each month, each year and each day. Backward: enter a target monthly income, and it shows the capital required to produce it — the number that turns 'live off my investments' from a phrase into a figure. At a 4% yield, $300,000 generates $1,000 a month, and a $4,000 monthly target needs $1.2 million. The yield is the judgement call. A 4% figure matches the classic safe-withdrawal rule for a diversified portfolio drawn down gently; a dividend-focused portfolio might yield 3-4%; a high-yield savings account rather less. Higher yields are always available, but they arrive wearing risk — a 9% yield that can be cut is not the same as a 4% yield that holds. The gap output is the actionable one: the additional capital between where you are and the income you want, which is simply another savings goal with a purpose attached.Formula
Monthly income = capital x yield / 12 | Required capital = target monthly income x 12 / yield
Tips
- 4% matches the classic safe-withdrawal rule for a gently-drawn portfolio.
- Higher yields always come with higher risk of the payout being cut.
- The gap output is your next savings goal — capital with a purpose attached.
- Run it backwards from a target income to get a concrete capital figure.
- Daily income reframes progress — even small capital buys real freedom per day.
Frequently asked questions
How much capital do I need to live off investments?
Target monthly income times 12, divided by your yield. At a 4% yield, $4,000 a month needs $1.2 million; $2,000 a month needs $600,000. The lower the safe yield you assume, the more capital the same income requires.
What is a safe yield to assume?
Around 4% matches the classic safe-withdrawal rule for a diversified portfolio drawn down gently. Dividend portfolios might yield 3-4%, high-yield savings rather less. Yields well above that are available but carry real risk of the payout being cut.
How is monthly passive income calculated?
Capital times yield, divided by twelve. $300,000 at 4% is $12,000 a year, or $1,000 a month. The calculator also shows it per day and per year, and works backwards from a target income to the capital required.
Is a higher yield always better?
No — yield and risk move together. A 9% yield that can be cut in a downturn is not the same as a 4% yield that holds. Sustainable income matters more than the headline rate, which is why the safe-withdrawal research anchors on a modest figure.
What does the gap figure mean?
The additional capital between what you have now and what your target income requires at your chosen yield. It converts 'I want passive income' into a concrete savings target — a number you can work toward like any other goal.