Question 1

What counts as passive income?

Accepted Answer

Passive income is money earned with minimal ongoing effort. Common sources include dividends from stocks and funds, rental income from real estate, interest from bonds or savings, royalties, and income from businesses you own but don't actively manage. This calculator covers dividend/investment income, rental property income, and other recurring passive income streams.

Question 2

How much do I need invested to live off dividends?

Accepted Answer

To find the portfolio size needed to cover your expenses with dividends alone, divide your annual expenses by the dividend yield. For example, if you spend $48,000 per year and your portfolio yields 2.5%, you would need $48,000 / 0.025 = $1,920,000 invested. This calculator projects how your portfolio and dividend income grow over time with regular contributions and reinvestment.

Question 3

Should I reinvest dividends or take the cash?

Accepted Answer

Reinvesting dividends accelerates portfolio growth through compounding — your dividends buy more shares, which generate more dividends. This is generally recommended while you're still building toward financial independence. Once your passive income covers your living expenses, you can switch to taking dividends as cash income. This calculator models both phases automatically.

Question 4

How does rental income compare to dividend income for financial independence?

Accepted Answer

Both can contribute to financial independence. Dividend income requires a large portfolio but is hands-off once invested. Rental income can produce higher cash-on-cash returns but requires property management, maintenance costs, and dealing with tenants. This calculator lets you combine both income streams to see your total path to covering expenses with passive income.

Passive Income Planner

Assumptions

Monthly Passive Income (Today)

Years to Full Coverage

Income at End of Projection

Passive Income vs. Expenses

Year-by-Year Projection