Is living off dividends possible?
Many people ask the question: Can you live off dividends? So, I’m here to answer that question today.
And show how you can go about living off dividends in retirement. Or, determine when you can retire on your dividends.
Living Off Dividends Today
We have been living off dividends for more than 6 years. So yes, I think it is entirely possible to live off dividends. Why? Because we are proof that it can be done. However, it takes knowledge, planning, and time to live off dividends.
Living Off Dividends Is Not A Get Rich Quick Scheme
I’m sorry to tell you than living off dividends takes time to accomplish. That’s why it is important to start early if you want to live off your dividends.
And, living off dividends may require a large investment portfolio. The size of that portfolio depends mostly on your living expenses.
Not Just Living Off Dividends – Making Some Earned Income Too
Now, I will admit that both my wife and I also have earned incomes. Those incomes come from second careers.
We only do the work we choose to do now. Not the high-stress, long hours of corporate drudgery we did in the past.
However, almost all the earned income we make goes into qualified retirement accounts. Also, we put earned income into our health savings accounts. And, the rest of that income goes to pay taxes.
There may be a little money left. But what is left is less than our expenses. So, we aren’t living off earned income.
Affiliate Link Disclosure: I may get paid commissions (at no cost to you) for purchases made through links in this post.
But We Could Be Living Off Dividends – Honest
Even if we both quit working today, we would have no problem covering our expenses. We would continue living off our dividends.
It is important to note that we didn’t create this situation overnight. My wife and I both started investing at a young age.
And, I focused on dividend growth stock investing more than 15 years ago. That type of planning is what makes living off dividends possible.
Like us, you may want to consider having some part-time or side income too. It will accelerate your path to living off dividends.
My Wife Didn’t Know We Were Living Off Dividends
A quick personal story before I get started…
It may not surprise you that I handle all of the personal-finance activities in our family. I make sure the bills are paid on time. Furthermore, I verify we have enough money in our bank accounts to get through the month. Finally, I research, monitor and manage our investments.
So, a few years ago my wife was working full-time. And I was trying to get a part-time college teaching side gig off the ground. I wasn’t teaching a lot at the moment. Therefore, I wasn’t making much money.
One day, my wife happened to look at her pay stub. And she noticed that the net pay from her 2 weeks of work was just a few dollars. So she asked me, “What are we living on?” And, my answer was: “dividends”.
Enough said! Let’s get on with the details of how to live off dividends.
How To Live Off Dividends – The Big Picture
Let’s look at the big picture first. In my opinion, to live off dividends you must do the following 4 things.
First of all, develop the motivation to live off dividends in the future. Then you need to take action with your finances now to prepare for living off dividends. Furthermore, you must execute a dividend stock investing plan to achieve your goal. Finally, you need time to execute your plan and have that plan become reality. So, start early in life.
Start doing these 4 things today and you will be living off dividends in the future.
We will cover these areas and more. Can you live off dividends? I think so. Let’s get on with it!
Living Off Dividends In Retirement – Finding The Motivation
Funding retirement is not what it used to be.
Pension Plans & Social Security
Perhaps your parents or grandparents could rely on a company pension and social security to fund a comfortable retirement lifestyle.
But, company pension plans are becoming a thing of the past. Hopefully, social security will be there for us. I am planning on it. But you never know.
Living Off Dividends From Dividend Stocks
So, dividends from dividend stocks can provide a big piece of your retirement income. However, living off dividends doesn’t have to be an all or nothing deal.
For example, my wife and I work in 2nd careers. We plan to work at least part-time for the foreseeable future. And I think most of us can plan on something from social security.
So let’s not make creating retirement income harder than it needs to be. We will consider other income sources in our how to live off dividends plan.
The Benefits of Dividend Paying Companies
I have been investing in dividend growth stocks for 15 years. And before that, mutual funds that paid dividends.
I like buying and holding a portfolio of dividend-paying stocks. Here are several reasons why I like to do this.
Real Cash For Living Off Your Dividends
Dividends are real cash. You and I can spend that cash. Or, reinvest it without touching the original investment. In learning how to live off dividends, I am going to show you how both aspects are important parts of the plan.
Good dividend growth stocks increase their dividends on an annual basis. Dividend increases provide the investor with more cash flow each year.
By investing fresh capital in dividend stocks, reinvesting dividends and receiving dividend increases you create a perpetual cash-generating machine. That is the goal.
Living off dividends in retirement provides cash without the need to decide which of your assets to sell and when.
Historically, 40% of the stock market’s long-term total return comes from dividends.
Dividend-Paying Companies Work Hard For The Investor
By selecting solid dividend growth stocks and holding them for the long term, the company does most of the work; not the investor.
Dividend payments and dividend increases provide evidence of a company’s financial strength.
Payment of consistent dividends often instills financial discipline on the company and its management.
Solid dividend-paying companies are frequently household names. We use their products and services each day.
Investment Costs And Inflation
Building and maintaining a dividend stock portfolio can be done for virtually zero investment costs.
Dividend increases by the companies we invest in will offset the effects of inflation.
The Risks Of Dividend Paying Companies
On the other hand, dividend investing is not without risk. And, the strategy has its drawbacks and detractors.
Now, I think the benefits far outweigh the risks. But I want to present a balanced argument for your consideration.
Dividend-paying stocks tend to be clustered in only a few sectors of the stock market. This situation can make it difficult to achieve proper investment diversification.
Since it takes a lot of capital to live off dividends, an individual may find they need to put all of their assets in dividends stocks. Once again, this can lead to inadequate diversification.
Dividend Yield & Risk Trade-Off
To achieve the goal of living off dividends, it is easy to fall into the high dividend yield trap. Higher dividend yields are nice. In the short term, they can provide more dividend income to cover your living expenses. And reduce the need for a larger dividend stock portfolio.
But higher dividends normally have a higher risk of being reduced. Multiple dividend reductions to a portfolio will destroy living off dividends strategy very quickly.
So, it’s important not only to focus on dividend yield but dividend safety and dividend growth potential. Besides, these other factors will lead to better long term investment returns.
Time, Skill & Discipline Required To Live Off Dividends
Running a do it yourself dividend stock portfolio takes time and skill. Sure, you can live off dividends by investing in 1 or 2 exchange-traded funds. However, I think individual dividend-paying stocks offer higher dividends when taking into account investment risk.
Finally, you need to be disciplined. You can’t bail out when the market drops. Or change your mind and start chasing the next hot investment. If you do these things, living off dividends will never become a reality.
You must have the discipline to make a plan and stick to it.
Topic Area Recap – The Motivation For Living Off Dividends
Can you live off dividends? Yes. I believe so. Find your motivation to do so.
Dividends can be an important part of your retirement income strategy. Furthermore, dividends from dividend-paying stocks offer many important advantages for an investor. Finally, there are some drawbacks to a dividend investing strategy. So, consider the pros and cons for yourself. The choice is yours.
What is up next in learning how to live off dividends? Before we start investing in dividend stocks, it is important to consider some other areas of your finances. Let’s address those now.
How To Live Off Dividend Stocks – Getting Prepared For Living Off Dividends
When living off dividends, it is best to put the odds of success in your favor. Here are a couple of areas to consider while you are working and preparing for living off dividends in retirement.
It is important to avoid consumer debt. Live within your means and get all credit card debt paid off.
Buy used cars and drive them for a long time. This will help to eventually eliminate car payments.
Your mortgage debt is okay. Pay it off based on the terms of your mortgage loan and you should be fine.
However, do not refinance and take cash out. Your home is not an automated teller machine. Ultimately, being mortgage-free will be a big plus when you are living off dividends.
Determine Your Annual Expenses
To know how much dividend income you will need, you need to know how much money you spend.
There are a couple of ways to determine what your expenses will be in retirement.
Living Off Dividends – Estimating Expenses Using The 80% Rule
This rule states that you need 80% of your earned income in retirement.
Why 80%? The rule assumes some of your costs will be eliminated once you retire. For example, you will not have the costs associated with commuting to and dressing up for work.
The 80% rule is easy to apply. It can give you a quick answer. But, let’s look at another method.
How To Live Off Dividends – Better Yet, Track Your Expenses
Tracking your expenses monthly is a great habit. Expense tracking allows you to know exactly where your money is spent.
To estimate your expenses, review your annual expenses during your working years. Then remove expenses no longer necessary in retirement. I already mentioned commuting and clothing costs. Perhaps you won’t be dropping $7 a day on lunch out with your co-workers either.
Next, don’t forget to add in new spending now that you are free of that 9 to 5 job. Higher travel costs come to mind. Also, add in health insurance costs if you are not qualified for government-sponsored health care.
Will you still have debt payments? Hopefully not, but be sure to take those into account. Finally, don’t forget about income taxes.
How To Live Off Dividends – Other Income Sources
So now you know how much your expenses are. But before we move on, subtract from your estimated expenses other sources of income you may have.
Consider social security income. And don’t forget pension income if you are lucky enough to have that. Maybe you will have other sources of income, like a part-time job or a side-gig.
Remember that a little extra income can go a long way to being able to live off your dividends sooner rather than later.
Living Off Dividends Calculator – An Example, Part 1
Once you know your expenses and other income sources you can determine how much dividend income is necessary to cover living expenses. I’m going to use an example based on an average US household.
The Sources For Our Living Off Dividends Calculations
According to a USA Today study, the average US household spends $67,801 per year.
Furthermore, based on a US News report the average social security recipient receives $17,532 per year.
Finally, I’m going to assume this household preparing to live off dividends has a $10,000 income from part-time work.
Now I can figure out how much dividend income this family will need to live off their dividends. It is their expenses minus their social security income minus their income from part-time work.
The First Living Off Dividends Calculation You Need
To run the living off dividends calculations…
- Start with $67,801 estimated annual expenses
- Subtract out $17,532 in social security income
- Subtract out $10,000 income from part-time work
This gives us $40,269. I’m going to round this answer to $40,000 to make it easier to remember.
So, our family requires $40,000 of dividend income each year to cover their expenses and support their standard of living.
It is important to note that if our family can reduce expenses, the less dividend income they will need. And, the sooner our family can live off dividends.
Saving, Investing & The Power of Compounding Dividends To Live Off Of
As I said at the beginning, living off dividends is not a get rich quick scheme. It is important to start saving and investing as early in life as possible.
Rarely do good things in life come quick and easy. The ability to live off dividends is no different.
Living Off Dividends Calculator – An Example, Part 2
Let’s run part 2 of the living off dividends calculator. This isn’t a perfect analysis, nor is it intended to be. Besides, everyone’s situation is different.
The purpose of this example is to provide a thought process so you can do your living off dividends calculation.
In that same USA Today study I just referenced, the average US household has $74,664 of income. This serves their expense needs of $67,801.
The difference leaves $6,863, or $575 per month to invest in dividend stocks. We will get to investing in dividend stocks in just a moment.
Now, let’s invest that $575 per month. $575 invested monthly at a 9% annual rate return will generate an investment portfolio of $1 million in 29 years.
If our family can reduce their expenses and invest $750 per month at a 10% annual return, the number of years to get a $1 million portfolio drops to 25.
The Moral Of This Story About Living Off Dividends
Yes. I know it seems like a long time. But, think of it this way. If you are 30 years old and can generate a $1 million portfolio in 25 years, then you can retire and live off dividends at the age of 55.
So, starting earlier and saving more are the best things you can do if you want to live off dividends in the future. And, you have complete control when you start and how much you save.
You can’t control investment returns. But history shows that 9-10% annual return from dividends stocks is entirely possible over the long run.
Topic Area Recap – Getting Prepared To Live Off Dividends
Can you live off dividends? Of course, you can. But you need to be motivated and you need to prepare.
In the first major section of this article, we talked about your motivation to live off dividends. Specifically, why and how dividends can be an important part of a retirement income strategy.
Then in the second major section, we discussed some important things to prepare for living off dividends. They are:
- Eliminate consumer debt
- Calculate your annual expense requirements net of other income sources
- Establish a monthly investment amount and start investing in dividend stocks
Back To Our Example – Living Off Dividends Calculator
We walked through the calculations for a typical US household. Our make-believe family needs $40,000 in dividend income. Now they need to build a $1 million investment portfolio by saving and investing each month.
$40,000 of annual dividend income by $1 million dividend stock portfolio tells us our family needs a 4% dividend yield. This is entirely possible.
If you run your calculations and the dividend yield is higher than 5%, the living off dividends strategy becomes riskier and more difficult to achieve.
Making Living Off Dividends Less Risky & More Attainable
To reduce your dividend yield requirements do a combination of the following:
- reduce your expenses
- save and invest more
- start investing earlier
- work longer
All of these actions will create a larger dividend stock portfolio for you to live off of.
So now, we are motivated and prepared to live off dividends. What’s next?
It is time to start investing in dividend stocks. I have many resources to help you with this at Dividends Diversify. I will highlight them as we go.
How To Live Off Dividends – Dividend Stock Investing
Let’s get started with a few of the basics. It’s important to know a little bit about dividends, dividend stocks and dividend stock investing.
What Are Dividends?
A company can do several different things with the cash they have from making a profit. They can
- Payoff debt
- Reinvest in their business
- Buyback their stock in the stock market
- Pay their investors a cash dividend
So, a dividend is cash paid to you as an investor in a company’s stock. That cash comes from the profits made by the business.
A company is not required to pay a dividend. And, before each dividend payment, the company’s board of directors must approve it and declare it.
What Types of Investments Pay Dividends
There are several different types of investments that pay dividends.
Mutual Funds & Exchange-Traded Funds
Mutual funds – Many mutual funds pay dividends. Mutual funds hold a collection of investments that allows an investor to get instant diversification by purchasing just one investment holding.
Exchange-traded funds (ETFs) – Exchange-traded funds are similar to mutual funds. The main difference is that an ETF tracks an index. And, ETFs trade on the stock market like an individual stock.
You can learn more about ETFs and read about one of my favorite dividend-paying ETFs here.
I have also researched and written about how to build a Vanguard 3 ETF portfolio that pays dividends.
Be sure to check these articles out. And learn more about how ETFs can be an effective part of your dividend growth investing strategy for income and income growth.
Special Types Of Stock
But, our real focus in this article is how to live off dividends by investing in individual dividend-paying stocks.
REITs – REIT stands for Real Estate Investment Trust. It refers to when a company owns, bankrolls or manages income-creating real estate. The rent that is generated from each property is distributed to the real estate shareholders as dividends.
Some people try living off REIT dividends. Because REITs offer higher dividend yields.
But, I think that is too risky. Living off REIT dividends alone does not provide enough diversification.
You can read more about REITs here. And, her is an article about my favorite real estate investment trust to invest in.
Preferred stocks – Preferred stock is a hybrid security that has a mix of bond and common stock characteristics.
The investor doesn’t have the capital appreciation or dividend growth potential like common stock. So, in exchange, the investor normally receives a higher dividend yield.
Common Stocks That Pay Dividends
By owning the common stock of a company, you are part owner in that business. And, participate in all the potential rewards and risks that go with ownership. One of those rewards includes dividend payments.
Common stocks that pay dividends are the focus of this article.
In my opinion, this investment type is the best for living off dividends. Why? Because you get to pick the stocks that pay an appropriate dividend amount regularly. And you pick the stocks that increase those dividends each year.
So, we want to invest in and have a plan for living off stock dividends. Then, how do we find those stocks and how do we pick them? We are going to cover that topic now.
How To Find Stocks That Pay Dividends
I have an in-depth article on how to find and select the best dividend stocks. Here are some of the highlights from that article. Be sure to check it out later for more information.
To get started, here are a few sources to find dividend-paying stocks.
Dividend stock screeners – Yahoo Finance has a dividend stock screener that I use periodically to generate dividend stock investment ideas.
Dividends Diversify model stock portfolio – The Dividends Deluxe model stock portfolio includes 40 dividends stocks that I own and evaluate for my purposes.
You can stop by here at Dividends Diversify anytime. I analyze and assess these dividend stocks so you don’t have to!
How To Live Off Dividends – Picking The Best Dividend Stocks
Now that we know how to find dividend stocks, we want to pick the best for our investment dollars. I have several criteria to select the best dividend stocks for my living off dividends stock portfolio.
Business model – How does the company make money?
Business strategy – How does the company plan to grow?
Dividend Metrics – Dividend Yield
Dividend yield – This is a calculation of the percentage of dividend per share received relative to the stock price. For example, if you buy a share of stock for $80 and that company pays $2 a year in dividends your dividend yield is $2 divided by $80, or 2.5%.
The dividend yield is a very important metric. Remember our example family needs a dividend stock portfolio that yields 4%.
Pick dividends stocks with dividend yields that are too low and our family won’t have enough dividend income to live off of. On the other hand, picking dividends stocks with high dividend yields may be too risky. I prefer stocks that have a dividend yield of 3-5%.
Dividend Metrics – Dividend Growth
Dividend growth rate – By investing in stocks that continually increase their dividend, our cash flow goes up without needing to do anything. The dividend increases offset the effects of inflation.
To calculate the dividend growth rate on an annual timeframe, take the current year’s dividend per share divided by the prior year’s dividend per share and subtract 1. This will give you the dividend growth rate compared to the prior year.
I like to look at the historical dividend growth rate over 1, 3, 5 and 7 year periods to understand what has been happening with a company’s dividend growth both short term and long term.
These calculations are a little more complex. I use a financial calculator to perform them.
Consecutive years dividend growth – How many years has the company increased its dividend in a row?
Dividend aristocrats are companies that have increased their dividends for at least 25 years in a row. Dividend Kings have consecutive dividend increase streaks of 50 years or more.
Take note that the lists of Dividends Aristocrats and Dividend Kings are great places to look for dividend stocks.
Dividend Metrics – Policy & Payout Ratio
Dividend policy – Some companies have a dividend policy statement or stated objective. This is helpful, but not necessary. Oftentimes the dividend policy is linked to a dividend payout ratio.
Dividend payout ratio – The dividend payout ratio is a measure of how much a dividend stock pays in dividends relative to their earnings and cash flow. The dividend payout ratio is another very important metric.
Lower dividend payout ratios are generally better. A lower ratio provides more dividend safety. It decreases the chance a company will cut their dividends when they have a bad year or two.
Look At The Business Fundamentals
Revenue growth trend – Higher dividends are paid from higher profits. And, higher profits come from a rising revenue stream.
Earnings trend – Higher profits can also come from other areas than growing revenues. Price increases, more profitable products, and cost reductions all can increase a company’s profits. These are all important factors that a good company will work on year after year.
Financial position – We want to avoid dividend stocks from companies that are on shaky financial ground. 2 things I look at are the company’s level of debt and its credit ratings. Lower debt levels and higher credit ratings are generally better. They increase dividend safety.
Try Not To Over Pay For Dividend Stocks
Stock valuation – We don’t want to overpay for our dividend stocks. But, this is a tricky area. The best dividend growth stocks rarely come at cheap valuations.
So it is best to buy shares consistently every month. This is called dollar-cost averaging.
And, when the next bear market in stocks comes, keep buying. This is when you will get the best prices and the highest dividend yields. If you have picked solid dividend-paying companies, their stock prices will eventually recover.
And remember, you will be living off dividends. Not ever selling your stocks.
So, the only price that matters is what you pay when you buy a dividend stock. The price at any point in time after that is irrelevant.
How Many Dividend Stocks Do You Need To Own If You Want To Live Off Dividends?
Okay, how many stocks should you include in your dividend stock portfolio? This is debatable. If you ask 3 different investors you might get three different answers.
Academic Research Suggests
Academic research suggests 20 – 25 stocks will achieve the greatest diversification with the least number of holdings.
Fewer than 20 dividend stocks and your investment risk gets significantly higher. But adding more than 25 stocks brings few additional benefits of diversification. At the same time, more stocks increase the time and complexity required to manage your living off dividends stock portfolio.
Strive For Diversification Among Sectors
Just be sure to have 20-25 stocks from different industries and different sectors of the stock market. For example, do not buy all your stocks from the utility sector.
Invest in several industries and sectors. Here are some examples of different sectors where good dividend-paying companies can be found: utilities, health care, technology, consumer goods, and industrial companies.
Building Your Living Off Dividends Stock Portfolio
I know I have thrown a lot at you so far. So, I want to call your attention to another great resource.
I wrote an article titled “How to Build a Portfolio of Blue Chip Stocks Paying Dividends”. You should check this out for additional information and perspective.
How To Buy A Dividend Stock
I get this question a lot. I will publish a dividend stock analysis about one of my favorite dividend-paying companies. Let’s say, Apple, for example. Or, AT&T.
Apple and AT&T are 2 stocks in the technology sector. And they are members of the Dividends Deluxe model portfolio.
Apple has a lower dividend yield and a higher dividend growth rate. On the other hand, AT&T has a higher dividend yield and a lower dividend growth rate. Both are suitable for a dividend growth stock portfolio.
For Beginning Investors
A new investor will read one of these reviews and get excited about investing in stocks for the first time. So they ask, how do I buy shares?
Here’s how to buy shares of stock…
Investors most commonly buy and trade stock through stockbrokers. The investor decides whether to go through an online brokerage firm or a face-to-face broker. Most stock trades by individual investors are made online these days.
There are a couple of online stock brokers that I recommend. You just need to open up an account.
Then transfer some money into your newly opened brokerage account. And then buy shares of the dividend stock of your choosing.
You can buy as few as one share or buy more if you like. So you do not need a lot of money to get started.
Zero Commission Online Stock Brokers
But you do need a brokerage account. Both of the following options allow you to trade stock for free. That means no commissions are charged for your purchase of shares.
The second option is M1 finance. You can sign up with M1 finance by following this link.
How To Manage Your Dividend Stock Portfolio
So, you are now buying and owning a portfolio of dividend stocks. Each month you are taking your extra cash and using it to purchase shares in 1 or more dividend stocks of your choosing.
But there is a little more work to be done. First of all, you are going to start collecting dividends. Hooray!
But you are still working and you are not living off dividends yet. So what do you do with the dividends that you are collecting? The answer is, reinvest them.
Furthermore, as time goes on, your portfolio is going to get out of balance. And, you will need to handle that little task too. I will explain that in a moment. Let’s cover dividend reinvestment first.
Reinvesting Your Dividends
You have a couple of options for reinvesting your dividends.
Automated Dividend Reinvesting
First of all, you can automate dividend reinvesting. What this means is that you tell your brokerage firm to automatically reinvest the dividends paid by a company back into that company’s shares.
The advantage of automated dividend reinvesting is that once you set up, you can forget it. And your cash from dividends is put back to work in your dividend stocks right away.
On the other hand, investment decisions are taken out of your control. You may automatically reinvest in shares of an overvalued stock. Or, a stock you own too much of already.
Manual, Lump Sum Dividend Reinvesting
The second option is to let your dividends accumulate in cash. And then when you are making your monthly purchases add your dividends collected to the amount you are saving each month. Then, put that money into the stocks of your choice.
The Dividend Reinvestment Choice Is Yours
Either of these dividend reinvestment methods is fine. It’s a matter of personal preference. And by all means, if you will be tempted to spend your dividends, reinvest them automatically.
Finally, when your dividends meet your expense needs, stop reinvesting them. Why? Hopefully, this is obvious by now. At that point, you will be able to live off your dividends. And, you will no longer want to reinvest them.
Rebalancing Your Dividend Stock Portfolio
Once or twice a year you should look at the values of the stocks in your portfolio. You know that you need about 20-25 stocks for adequate diversification.
So, make sure that no one individual stock makes up an oversized position in your portfolio. In a perfect world, if you had 25 stocks each would be worth 4% of the total value of your how to live off dividends stock portfolio.
But, it’s not a perfect world. So, it’s good to set a maximum percentage and make sure no individual stock exceeds that maximum level. Let’s say 10% for sake of argument.
What do you do if a stock starts to reach its maximum percentage? Either sell some shares and use the proceeds to buy other dividend stocks. Or, stop investing in it and try to increase the value of your other stocks with new money. That money can come from your monthly savings and accumulated dividends.
Protect Your Living Off Dividends Portfolio With Diversification
What you don’t want is one stock getting too big. If the company runs into business troubles, it can blow a hole in your how to live off dividends portfolio.
Diversification provides protection. And if you pick the right stocks, this probably won’t happen. But it can. General Electric and Kraft-Heinz are recent examples of companies that ran into trouble and had to reduce their dividends.
Topic Area Recap – Building Your How To Live Off Dividends Portfolio
Can you live off dividends? For sure you can. But, you must learn how to build and maintain a dividend stock portfolio.
And, we covered a lot about dividend investing in this section. But it comes down to just a few things.
First of all, identify, select and buy the right dividend stocks each month. Furthermore, reinvest the dividends you receive. Finally, periodically rebalance your portfolio so no one stock becomes too large.
Let’s now wrap this up with a few key points to take away and remember.
Wrap Up & Key Success Factors For Living Off Dividends
First of all, here are the major topics covered in this article:
- Why you would want to live off dividends – your motivation
- Some steps necessary to prepare for living off dividends while you are working
- How to execute a dividend stock investing plan to achieve your goal of living off dividends
Furthermore, here are key factors that will lead to success for living off dividends in retirement:
- Start dividend stock investing when you are as young as possible
- Eliminate consumer debt while working
- Estimate the annual expenses you will need to cover with dividends
- Determine the size of the dividend stock portfolio that is required to meet your income needs
- Learn how to identify and select the best dividend stocks for your investment dollars
- Save your excess cash and invest in dividend stocks every month
- Reinvest all of your dividends received back into your dividend stocks
- Rebalance your dividend stock portfolio periodically so no one stock gets too large
Then when you meet your goal and dividend income covers your expenses:
- Stop reinvesting your dividends
- And, enjoy living off your dividends
Can You Live Off Dividends?
That is the question I posed at the beginning of the article. Hopefully, I have shown you how to live off dividends.
First of all, run your living off dividends calculations.
Furthermore, get busy preparing to live off dividends today so you can do so in the future.
Finally, come back soon for more dividend investing tips and dividend stock reviews. Below are a few of the resources I highlighted in this article.
Related Articles & Resources
- How to pick dividend stocks
- Building a Vanguard 3-fund portfolio paying dividends
- How to build a blue-chip stock portfolio paying dividends
- Trent’s goal of living off dividends someday
- Book review: Dividends Still Don’t Lie
- Webull online stock trading platform
- M1 Finance online stock trading platform
Disclosure & Disclaimer
This article, or any of the articles referenced here, is not intended to be investment advice specific to your situation. I am not a licensed investment adviser, and I am not providing you with individual investment advice. The only purpose of this site is information & entertainment. We are not liable for any losses suffered by any party because of information published on this blog. See this site’s Disclaimer and Privacy tab for more information.