Passive Income to $1M Calculator

Building $1 Million Through Passive Income: The Path to Financial Independence

Passive income isn't about getting rich quick—it's about building assets that generate cash flow without trading hours for dollars. A $1 million portfolio producing 8% yield gives you $80,000/year ($6,667/month) in passive income. That's financial independence for most people.

The Five Best Passive Income Streams

1. Dividend Stocks (3-5% yield)

Invest in dividend-paying stocks or dividend ETFs. Companies pay quarterly dividends—cash deposited directly to your account. Reinvest dividends to compound. A $400K portfolio at 4% yield = $16,000/year passive income.

2. Real Estate Rental Income (5-10% cash-on-cash)

Buy rental properties that cash flow after expenses. $200K invested across 3 properties might generate $1,500-2,000/month net income. Leverage amplifies returns but adds complexity.

3. REITs (4-7% yield)

Real Estate Investment Trusts own commercial real estate (apartments, offices, warehouses). Buy like stocks, get rental income without being a landlord. VNQ (Vanguard REIT ETF) yields ~4%.

4. Bonds & Bond Funds (3-5% yield)

Government/corporate bonds pay fixed interest. Lower yield but very stable. Good for retirees needing predictable income. A $300K bond portfolio at 4.5% = $13,500/year.

5. Online Businesses/Digital Products (variable)

Create courses, software, ebooks, membership sites. High upfront effort, but can generate income for years. A $49 course selling 50/month = $2,450/month passive income.

The 4% Rule for Passive Income Living

Financial independence formula: Annual expenses ÷ 0.04 = Amount needed

• Live on $40K/year → Need $1,000,000
• Live on $60K/year → Need $1,500,000
• Live on $80K/year → Need $2,000,000

Once your passive income assets hit 25x your annual expenses, you can retire and live off passive income indefinitely.

Passive vs. Active Income: The Leverage Difference

Active income: Trade time for money. Stop working = income stops. Doctor making $300K/year has zero passive income if they can't work.

Passive income: Money works for you. $1M at 8% yield = $80K/year whether you work or not. Scales without your time.

Goal: Replace active income with passive income to achieve financial freedom.