Being able to earn $10,000 a month is a true dream come true, be it now or at retirement. This is a massive $120,000 per year and represents a goal 6 figure income for most of us. So, it would be pretty incredible to earn this amount passively.

Making $10,000 a month from investment income depends on a few factors. The main factor is how much you have to invest. However, how much you need to invest relies heavily on what is the return on your investment.

Here are a few examples to elaborate on the point.

How much money to invest to make $10,000 a month?

The calculation is pretty straightforward. Well, reverse-forward in this case!

How much to invest = ($10,000/yield)

Yield is the return on investment. For example, dividends received on your investment as a percentage is the number you want to substitute here.

If your investments have a return of 4% per annum, the formula is = ($10,000/4%*12). Mind you, the *12 is because the 4% return is per annum. The answer to this formula is $3,000,000.

Yup, that’s a BIG number. But one way you can reduce this number is by increasing the yield.

For example, same formula but this time we have a 6% return on investment per annum. So, ($10,000/6%*12) = $2,000,000. Just a 2% increase in annual return shaved off the investment required by a staggering $1,000,000, or reduced by 33%.

You can work out the investment amount you need to arrive at a specific monthly income with this formula.

Finding how much to invest is easy. Actually accumulating this investment amount is the tough part.

How much to invest to make $10,000 a month at retirement?

Granted, nothing changes about the amount you need to make $10,000 a month be it investing right now or investing at retirement. However, one good thing about retirement is that it’s a future event and hopefully many years ahead as well.

Usually, the value of money reduces with time thanks to a concept called inflation. However, you can beat this reduction in value with compounding returns. Basically, compounding returns are when you re-invest the dividends back into your portfolio. So, next time you earn a dividend, it will be dividends on dividends, too. This is the fastest way to grow your investments.

When you compound your returns through several years, the amount you have to invest out of pocket will reduce. The longer the time you have (or the earlier you start) the lesser will be the investment required by you.

Let’s assume we need $2,000,000 to make $10,000 per month on dividend income at a 6% yield per annum. If you want to earn this income now, you need to have $2,000,000 in hand to invest today.

But let’s assume you start your journey 10 years ahead.

Year	Investment	Annual Income on Investment
1	$1,185,000	$71,100
2	$1,256,100	$75,366
3	$1,331,466	$79,888
4	$1,411,354	$84,681
5	$1,496,035	$89,762
6	$1,585,797	$95,148
7	$1,680,945	$100,857
8	$1,781,802	$106,908
9	$1,888,710	$113,323
10	$2,002,033	$120,122

10 years of compounding reduced the investment requirement by a massive $850,000. Just for reference, if you start 20 years earlier, you only need $665,000 to make $10,000 a month.

So, we urge you all to begin your retirement planning process as soon as possible to take advantage of this compounding benefit.

Let us know what you think about this article in the comments below. What is your retirement income goal?