Passive Income From Investments Calculator
Enter your portfolio size and allocation across five asset classes to see how much monthly passive income your investments can generate. Choose between a yield-only strategy (spending only what your portfolio earns) or the 4% rule (a widely studied safe withdrawal rate for retirement). Tax impact on non-tax-advantaged accounts is also estimated using 2026 federal rates.
When to use this calculator
- FIRE (Financial Independence, Retire Early) planning
- Estimating retirement income before touching principal
- Comparing yield-only vs 4% safe withdrawal strategies
- Deciding how to allocate between income-generating asset classes
- Understanding the tax drag on taxable brokerage income
- Stress-testing whether a portfolio can cover monthly expenses
How it works
2 min readWhat is passive income from investments?
Passive income from investments is money earned regularly from your portfolio without active work, generated through dividends, interest, and distributions. A $500,000 portfolio across diversified assets like bonds, stocks, and REITs can yield $1,500–$2,000 monthly depending on allocation and market conditions.
How It Works
This calculator applies a blended yield to your portfolio based on your chosen allocation across five income-producing asset classes. Each class carries a 2026 benchmark yield:
Bonds / Bond Funds: 4.0% annual yield
Dividend Stocks: 3.0% annual yield
REITs: 5.0% annual yield
High-Yield Savings / MM: 4.5% annual yield
T-Bills / Short-Term Treas.: 4.8% annual yieldFormula
Blended Yield
Blended Yield = (pct_bonds × 4.0% + pct_dividend × 3.0%
+ pct_reits × 5.0% + pct_hysa × 4.5%
+ pct_tbills × 4.8%) / 100Yield-Only Strategy (preserves principal)
Annual Gross Income = Portfolio Value × Blended Yield
Monthly Gross Income = Annual Gross Income / 124% Rule Strategy (planned principal drawdown over ~30 years)
Annual Gross Income = Portfolio Value × 4%
Monthly Gross Income = Annual Gross Income / 12Tax Estimate (taxable accounts only)
Income is modeled at a simplified flat marginal rate. Qualified dividends and long-term capital gains receive preferential rates (0%, 15%, or 20% depending on income), but bond interest, REIT dividends, and HYSA/T-Bill interest are taxed as ordinary income. This calculator applies the selected bracket uniformly as a conservative estimate:
Annual Tax = Annual Gross Income × (tax_bracket / 100)
Monthly Net = (Annual Gross Income − Annual Tax) / 12Worked Example
| Input | Value |
|---|---|
| Portfolio Value | $500,000 |
| Allocation | 20% each across all 5 classes |
| Strategy | Yield-Only |
| Account | Taxable, 22% bracket |
Blended Yield = (20×4.0 + 20×3.0 + 20×5.0 + 20×4.5 + 20×4.8) / 100 = 4.26%
Annual Gross = $500,000 × 4.26% = $21,300
Monthly Gross = $21,300 / 12 = $1,775
Annual Tax = $21,300 × 22% = $4,686
Monthly Net = ($21,300 − $4,686) / 12 = $1,384
Limitations
Frequently asked questions
What is the 4% rule and is it still valid in 2026?
The 4% rule states you can withdraw 4% of your portfolio in year one, then adjust for inflation annually, with a high historical probability of not running out of money over 30 years. Research from Morningstar and Vanguard suggests it remains broadly applicable but may be conservative for longer retirements (40+ years). Some planners now use 3.3%–3.5% for early retirees.
What yields does this calculator use for each asset class?
Bonds/Bond Funds: 4.0% (aggregate bond index approximation). Dividend Stocks: 3.0% (S&P 500 dividend yield range). REITs: 5.0% (REIT index historical payout). HYSA/Money Market: 4.5% (competitive online bank rates, 2026). T-Bills/Short-Term Treasuries: 4.8% (4-week to 1-year T-Bill range, 2026 TreasuryDirect data).
How are REITs taxed differently from dividend stocks?
Most REIT distributions are classified as ordinary income (not qualified dividends), so they are taxed at your marginal rate rather than the lower 0–20% qualified dividend rate. The 20% pass-through deduction (Section 199A) may partially offset this for non-corporate investors. This calculator uses a flat marginal rate as a conservative estimate.
Does the yield-only strategy truly preserve my principal?
In nominal terms, spending only income leaves the principal balance unchanged. However, inflation erodes purchasing power over time, and market fluctuations can change the portfolio's real value. Bond funds, REITs, and dividend stocks all carry price risk in addition to their income component.
Why doesn't my allocation add up to 100%?
The calculator checks whether your five allocation percentages sum to 100%. If they do not, a warning is shown. The blended yield calculation scales proportionally to whatever total you enter, but for accurate results your allocations should sum to exactly 100%.
Should I use a Roth IRA or traditional IRA for income investing?
Roth IRAs provide tax-free withdrawals in retirement, making them ideal for high-yield assets like REITs. Traditional IRAs defer taxes until withdrawal, useful for bond interest taxed as ordinary income. This calculator models tax-advantaged accounts as having no current tax drag, which best represents Roth distributions or pre-withdrawal accumulation.
How does HYSA income compare to T-Bills for a taxable investor?
T-Bill interest is exempt from state and local income taxes; HYSA interest is not. For investors in high-tax states (e.g., CA at 13.3%, NY at 10.9%), T-Bills may net more after-tax income even if the nominal yield is similar. This calculator does not model state taxes, so factor that difference in manually.
What portfolio size do I need to retire on $4,000/month using the 4% rule?
Using the 4% rule: Annual need = $4,000 × 12 = $48,000. Required portfolio = $48,000 / 0.04 = $1,200,000. With a yield-only strategy at a 4.26% blended yield, you would need roughly $1,127,000 to generate the same gross income, but your principal would remain intact.
Are these yields realistic for 2026?
The yields reflect 2026 benchmark ranges based on TreasuryDirect, Vanguard index fund data, and competitive HYSA rates. They are subject to change with Federal Reserve policy. T-Bill and HYSA yields in particular are sensitive to Fed Funds Rate moves. Always verify current rates before making investment decisions.
Does this calculator account for dividend growth?
No. This calculator uses static yield rates. In practice, dividend growth investing (e.g., Dividend Aristocrats) produces increasing income over time as companies raise payouts. A 3% starting yield with 6% annual dividend growth doubles income roughly every 12 years, but that compounding is outside the scope of this snapshot calculator.