Passive income is the holy grail of investing for many of us. Who doesn't want to earn while they sleep? However, generating consistent income without taking excessive risks requires more than just luck. It takes discipline, patience, and a keen eye for value.

Reaching retirement at age 60 with enough passive income to live comfortably depends on two main factors. Namely: What is the amount required to cover annual expenses, and how reliable is this income generation?

For most investors, the goal is not just to stop working, but to reach a point where investment income replaces salary without eroding the capital base — the money in the portfolio.

A stocks and shares ISA is an ideal way to do this. Its tax-exempt status means that every pound of dividends or interest income can be kept in full. This helps the compound return faster over time.

This advantage becomes particularly powerful over decades, especially if the investor regularly contributes to the annual bonus.

So, how much passive income does one need to retire at age 60?

Well, someone planning a modest retirement might target £20,000 to £25,000 a year, while a more leisurely lifestyle might require £35,000 or more.

Translating these numbers into investment terms depends on the expected return. A portfolio yielding 4% would need approximately £625,000 to generate £25,000 per year.

This can be supplemented by a personal or state pension.

Run the math

Well, how does one build a £625,000 portfolio in an ISA?

Okay, let's look at the math.

Starting from nothing, and assuming annual growth of 8%, the investor would need to contribute £500 per month for 28 years.

But what if you are not 28 years old?

It would take 20.5 years when investing £1,000 a month – assuming 8% annual growth.

And if the growth rate is stronger?

Having £1,000 and an annual return of 12% would mean achieving the goal in just 16 years.

Know where to invest

For novice investors, knowing where to invest can be quite daunting. That's why many will choose index-tracking funds as a starting point.

However, investors wanting to take a more active approach may consider investing in individual stocks to beat the market.

AstraZeneca (LSE:AZN) – the largest company on the UK index – is certainly worth considering, especially after US tariff pressures were eased by a $4.5 billion commitment to expand manufacturing in Virginia.

This step strengthens its relationship with Washington and supports its plan to generate half of its expected revenues of $80 billion in 2030 from the American market.

Trading at about 18 times forward earnings, the stock sits at a modest discount to the pharma sector, while expected annual earnings growth of about 15% gives a price-to-earnings-to-growth (PEG) ratio of 1.2 — about 33% below the industry average.

The main risk is inherent in this sector. Heavy R&D spending does not always lead to marketable breakthroughs.

However, AstraZeneca's strong oncology focus and large drug pipeline provides room for sustainable growth over the long term and mitigates some R&D risks.

If an investor already has £625,000 and is looking for passive income, there may be better dividend-paying stocks.