Investment Income Calculator
Passive investment income is the cash your portfolio generates without selling assets — from dividends, bond interest, and systematic withdrawals. This calculator works both ways: see what your current portfolio produces monthly, or find how much you need to invest for a target income.
Choose a mode, enter your numbers, and see monthly income, annual income, and a 20-year inflation-adjusted projection.
The 4% Rule and Safe Withdrawal Rates
The "4% rule" — one of the most cited principles in retirement planning — states that retirees can withdraw 4% of their portfolio in year one and adjust that amount for inflation each subsequent year, with a high historical probability of the portfolio lasting 30+ years. The rule emerged from research by financial planner William Bengen in 1994, who backtested every 30-year retirement window in US market history since 1926.
At a 4% withdrawal rate, the math is straightforward: to generate $X in annual income, you need a portfolio of 25× that amount (since 1 ÷ 4% = 25). For $60,000/year ($5,000/month), you need $1.5 million. For $36,000/year ($3,000/month), you need $900,000. More conservative planners use 3.5% (28× income), particularly for longer retirements or uncertain markets.
What Makes a Withdrawal Rate Sustainable
A withdrawal rate is sustainable when your portfolio grows fast enough to offset withdrawals indefinitely. If your portfolio earns 7% annually and you withdraw 4%, the net growth is 3% per year — the portfolio grows over time, providing a buffer against inflation and extended longevity. If withdrawal rate exceeds return rate, the portfolio shrinks each year and eventually runs out. The higher your return and the lower your withdrawal rate, the more sustainable the income.
| Monthly Income Target | Annual Income | Portfolio at 4% | Portfolio at 3.5% |
|---|---|---|---|
| $1,000/mo | $12,000 | $300,000 | $343,000 |
| $2,500/mo | $30,000 | $750,000 | $857,000 |
| $5,000/mo | $60,000 | $1,500,000 | $1,714,000 |
| $8,000/mo | $96,000 | $2,400,000 | $2,743,000 |
| $10,000/mo | $120,000 | $3,000,000 | $3,429,000 |
Dividend Income vs. Total Return Withdrawals
There are two approaches to generating portfolio income. The dividend income approach constructs a portfolio of dividend-paying stocks, REITs, and bond funds designed to generate 3%–5% annual income naturally, without selling shares. The income is the dividends and interest. The total return approach invests for maximum growth and systematically sells assets to fund withdrawals. Most financial research shows total return approaches outperform over long periods because they don't restrict you to dividend-paying stocks (which can underperform growth stocks), but some investors prefer dividend income for its psychological comfort.
To calculate how much you need to accumulate before you can live on investment income, the FIRE Number Calculator uses this same math with a target savings rate. For retirement-specific income planning including Social Security and RMDs, see the Retirement Income Calculator.
Frequently Asked Questions
What is a safe withdrawal rate?
The safe withdrawal rate is the percentage of your portfolio you can withdraw annually with a high probability of not running out of money over 30 years. The classic "4% rule" from Bengen's 1994 research found 4% worked across all historical 30-year windows. More conservative planners now use 3.5%–3.8% given lower expected future returns. The lower your withdrawal rate, the more sustainable your income.
How much do I need to invest to make $2,000 a month?
At a 4% withdrawal rate: $2,000/month = $24,000/year ÷ 4% = $600,000 portfolio. At 3.5% withdrawal: $686,000. At 5% withdrawal: $480,000 (higher withdrawal rate increases depletion risk). Use the calculator above with your specific target and withdrawal rate for an exact figure.
What is the 4% rule?
The 4% rule states that retirees can withdraw 4% of their portfolio value in year one, then increase that dollar amount by inflation each year, with a very high historical probability of the portfolio lasting 30+ years. It's based on backtesting US stock and bond returns from 1926 to 1994. The rule implies a "25× annual expenses" savings target for retirement — if you spend $50,000/year, you need $1.25M.
Does inflation affect my investment income?
Yes, significantly over long periods. At 3% inflation, your purchasing power halves every 24 years. A $4,000/month income today is worth only about $2,200/month in purchasing power 20 years from now if you don't increase withdrawals. A sustainable withdrawal strategy either grows the portfolio enough to fund inflation-adjusted increases each year, or starts at a low enough withdrawal rate that there's a buffer for inflation.
What generates investment income without selling assets?
Dividends from stocks and equity funds, bond coupon payments from individual bonds or bond funds, REIT distributions (required to pay out 90% of income), and savings account/CD interest. A diversified income portfolio combining dividend stocks, bonds, and REITs can generate 3%–5% annual income naturally without selling principal.
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