Investment Income Calculator

Calculate the passive income generated by your investment portfolio.

Status: Algorithmic Audit (CPA Review Pending)
Jurisdiction: United States (IRS & SSA Standards)
Tax Year / Constants: 2026 Statutory Limits
Data Privacy: 100% Client-Side In-Browser

The Mathematical Formula

Annual Portfolio Cash Flow = ∑ [ Asset Balance_i × Annual Yield_i ] ; Monthly Income = Annual Cash Flow / 12

Variable & Parameter Definitions

  • Asset Balance_i The market capital allocated to individual asset holding i.
  • Annual Yield_i The expected dividend yield, bond coupon rate, or distribution yield of asset i.
  • Annual Cash Flow Total recurring gross passive income generated across the portfolio.
  • Monthly Income Evenly distributed monthly cash budget available for living expenses.

Real-World Worked Scenario: $600,000 Dividend & Bond Retirement Portfolio

A retiree allocates $600,000 across dividend aristocrats (3.8% yield on $350k), investment-grade corporate bonds (5.2% on $150k), and money market funds (4.5% on $100k).

  1. Dividend Stock Income: $350,000 × 0.038 = $13,300/year.
  2. Corporate Bond Income: $150,000 × 0.052 = $7,800/year.
  3. Money Market Yield: $100,000 × 0.045 = $4,500/year.
  4. Total Annual Passive Cash Flow: $13,300 + $7,800 + $4,500 = $25,600/year.
  5. Average Monthly Income: $25,600 ÷ 12 = $2,133 per month; Weighted Portfolio Yield: 4.27%.
Key Financial Takeaway: Diversifying across dividend equities, fixed income, and cash creates consistent passive cash flow without requiring asset liquidation.

Strategic Insights & Pitfalls to Avoid

  • ✓ Yield Traps: High headline yields (8%+) often indicate distressed companies with imminent dividend cut risks.
  • ✓ Dividend Growth: Prioritize dividend growth over static high yields to protect purchasing power against inflation.
  • ✓ Tax Drag: Qualified dividends are taxed at 0%, 15%, or 20% capital gains rates, while bond interest is taxed at ordinary income rates.

Frequently Asked Questions

What is the difference between dividend yield and total return?

Dividend yield only reflects cash distributions. Total return combines cash yield plus stock price appreciation.

Can I live off investment income without selling shares?

Yes. Living off yield alone preserves your underlying share count, though your portfolio will still experience market price volatility.

How are dividends taxed in the United States?

Qualified dividends held for over 60 days are taxed at preferential long-term capital gains rates (0%, 15%, or 20%). Non-qualified dividends are taxed as ordinary income.

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