Passive Income Target Calculator
Calculate how much capital you need to generate a target monthly passive income from dividends, rental income, or investment returns.
What Is Passive Income? Passive income is money earned from capital you have already deployed — dividends from stocks, interest from bonds, rent from property, or distributions from funds. You are not actively working for the income; your money is working for you.
The Core Formula Capital needed = Annual income target ÷ (After-tax return rate) After-tax return = Annual return % × (1 − Tax rate %) Real return = After-tax return − Inflation rate
Nominal vs Real (Inflation-Adjusted)
- Nominal: Ignores inflation. Shows the capital needed based on your stated return rate.
- Real (inflation-adjusted): Accounts for the fact that $3,000/month today buys less in 20 years. To maintain your purchasing power, your real return must exceed inflation.
The 4% Rule (FIRE Community) The “4% rule” states that withdrawing 4% of a portfolio per year is historically sustainable. That means you need 25× your annual spending invested to be financially independent. Example: $3,000/month × 12 = $36,000/year → 25× = $900,000 required.
Important Caveats
- Returns are not guaranteed. Past performance does not predict future results.
- Tax treatment of passive income varies (dividends, capital gains, rental income).
- Inflation erodes purchasing power over time — use the real return calculation for long-term planning.
- This calculator does not account for portfolio rebalancing, sequence-of-returns risk, or tax-loss harvesting.