Project future passive income from investments based on contributions, returns, and withdrawal rate.
Income Engine Configuration
Input your capital and expected yields to forecast your cash flow.
Methodology
Value = Investment × (1 + Growth + Yield)^Time
(Assuming DRIP is enabled)
This calculator treats "Growth" (Share Price Increase) and "Yield" (Dividend Payout) separately. This allows you to model high-yield/low-growth assets (like REITs) vs. low-yield/high-growth assets (like Tech Stocks).
Most calculators lump everything into "Return." We separate them because they serve different purposes.
Capital Appreciation (Growth): The stock price goes up. You only get paid if you sell the asset. (e.g., Tech stocks).
Yield (Cash Flow): The asset pays you cash without you selling it. (e.g., Dividends, Rent, Interest).
For passive income, Yield is king. You want to pay bills with the cash flow, never touching the principal.
The Magic of DRIP (Dividend Reinvestment)
DRIP stands for Dividend Reinvestment Plan. Instead of taking the cash, your broker automatically uses it to buy more shares.
This creates a feedback loop: More Shares → More Dividends → Buy Even More Shares → Even More Dividends. This is how small portfolios become massive over 20 years.
Yield on Cost: The Hidden Metric
If you buy a stock at $100 with a $3 dividend, your yield is 3%.
In 10 years, if the stock goes to $200 and the dividend doubles to $6, your yield on current price is still 3%. But your Yield on Cost is 6% ($6 dividend / $100 original cost).
Long-term investors often see Yield on Costs of 20%, 50%, or even 100% on assets held for decades.
Top 4 Assets for Passive Income
Dividend Aristocrats: S&P 500 companies that have increased dividends for 25+ consecutive years. (Reliable).
REITs (Real Estate Investment Trusts): Companies that own real estate. By law, they must pay out 90% of profits as dividends. (High Yield).
Bonds: Loans to governments or corporations. They pay fixed interest. (Low Risk, Low Growth).
High-Yield Savings: The safest option, but returns usually just match inflation. (Zero Risk).
The "Snowball Effect" Timeline
Building passive income is boring at first.
Year 1-5: The "Slog." Your dividends barely buy a coffee. You must feed the machine with monthly contributions.
Year 5-10: Momentum. The dividends now buy a monthly dinner.
Year 15-20: The Explosion. The dividends might now exceed your monthly contributions. The snowball is rolling itself.
Frequently Asked Questions (FAQ)
Common questions about income investing
Is high yield always better?
No! A "Yield Trap" is a stock with a massive yield (e.g., 12%) because its share price has crashed due to business failure. These dividends are often cut. Look for sustainable yields (2-5%).
How are dividends taxed?
"Qualified Dividends" (held for 60+ days) are taxed at favorable capital gains rates (0%, 15%, or 20%). Non-qualified dividends (like REITs) are taxed as ordinary income (your highest bracket).
Should I use an ETF or individual stocks?
For most, ETFs (Exchange Traded Funds) like SCHD or VYM are safer. They hold 100+ dividend-paying companies, so if one cuts its dividend, your income stream isn't destroyed.
Does passive income count toward FIRE?
Yes! If your passive income > your expenses, you are Financial Independent. You don't even need to sell shares (withdraw 4%) because the cash protects the principal.
How much to generate $1,000/month?
At a 4% yield, you need $300,000 invested. ($300,000 × 0.04 = $12,000/yr = $1,000/mo).
Can I lose money?
Yes. If the underlying asset price drops, your Principal Value drops. However, if the company is strong, they will keep paying the dividend. Passive investors focus on the income check, not the daily price.
What is a Dividend Payout Ratio?
The percentage of earnings a company pays out. A ratio <60% is healthy (they keep enough cash to grow). A ratio >100% is dangerous (they are borrowing money to pay you).
Are real estate rentals truly passive?
Usually, no. They require maintenance, tenant management, and repairs. REITs (Real Estate stocks) are truly passive real estate investments.
What happens during a recession?
Stock prices fall, but dividends are "sticky." Companies hate cutting dividends because it signals weakness. Historically, dividends are far less volatile than stock prices during crashes.
Why reinvest? Why not take the cash?
In the accumulation phase, you don't need the income. Reinvesting uses the cash to buy more shares when prices are low, supercharging your future income potential.
Summary
The Passive Income Projection Calculator helps you transition from "Working for Money" to "Money Working for You."
By splitting growth and yield, it gives a realistic picture of the cash flow you can expect to live on in the future, independent of market crashes.
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Project future passive income from investments based on contributions, returns, and withdrawal rate.
How to use Passive Income Projection Calculator
Step-by-step guide to using the Passive Income Projection Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Passive Income Projection Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Passive Income Projection Calculator is designed to be user-friendly and provide instant calculations.
Is the Passive Income Projection Calculator free to use?
Yes, the Passive Income Projection Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Passive Income Projection Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Passive Income Projection Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.