I am 72 and I can tell you income is so important in retirement and as you age. There is no simple formula, but you want sufficient cash flow with little worry to be happy. For people planning retirement it is still theoretical. But when it is real time, you want stability...
I am a retired, 70-year old first-time buyer, and managed save enough money to pay cash for a house… also, I have a monthly pension that will cover utilities, maintenance and insurance; however, I am still nervous/anxious/leery of taking the house purchase plunge for what will be my “forever home”.
I look for dividend "aristocrats" and I prefer monthly dividends though quarterly is ok. Right now I have $20,000 in stocks and it projects to $1,253 in annual dividends. I'm aiming for $1,000/month in dividend income.
@@helloitsmehbIf he has enough to earn $25k/year in dividends, he likely has enough to draw down on his balance to meet his needs, should the dividends disappear. I'd rather have my dividends disappear than not invest because of fear.
You left out one major consideration of having a dividend portfolio. T%hat is the favorable tax treatment of qualified dividends. In your example, a couple with $24K per year in dividends and 48K per year in social security, their income would make $9,400 of their social security taxable. However, at the $72K gross income the tax rate for the $24K of dividends would be 0%. Thus the total taxable income for the couple would be $9,400. In 2023 assuming the couple are both 65 or older the standard deduction is $30,700, so the couple would pay no federal income tax. Similarly if the same couple took $24K out of their 401K, IRA of from pension income, their taxable income would be $9,400+$24,000 = $33,400. After the standard deduction they would owe tax on $2,700 or $270 in 2023. This become a significant factor as income increases. If their income was $90K, taxable income would be $41,400 if the money came from a 401K etc. and the tax owed would be $1,070. If that same money came from dividends the taxable SS would increase to $24.7K with the dividends still taxed at 0% giving taxable income of $24,7K, which is still less than the standard deduction so no tax would be payable. That couple could have a gross income up to about $108K before any of their dividend income would be taxable, where the tax saving due to dividend income would be about $6,500 at $108K total income. If your dividend portfolio is paying say 3.25%, the tax saving is the equivalent of about $200K in your dividend portfolio. Note this is just the federal tax situation. Obviously state taxes also need to be considered. This just illustrates that any retirement financial plan must include tax planning.
Yeah, Todd. I've seen a few of James' videos. He glosses over some of the more salient points, regularly. I believe his videos are just to generate the RUclips revenue for his family. If he were to give all his knowledge and advice in a single, coherent video, then I'm sure it would be phenomenal. Unfortunately, it would also be several hours long and RUclips wouldn't pay him anymore (having only a single video). But I agree, I do wish he would at least make reference to some critically-important, related topics.
I use growth stocks to add to my dividends. Im 40 and once I get to a certain level on my growth stocks, Ill take some profits and add to my dividend stocks. Then Ill look for more growth stocks and add to those with some profits.
Our advisor has us invested to earn dividends, withdrawing $5,800/month. We are not withdrawing all we earn monthly. Add to that $4,600/month in SS and we’re doing just fine. You hit the nail on the head.
Amazing that a CFP speaks about dividends in a positive way... unless youre way into retirement... Love dividends and the snowball effect... Thanks for the great video.... Very well done.... Great information....
I keep an investment journal and the main item I record almost daily is my projected annual dividends, not my stock valuation. Then when the market goes haywire, I just look at my investment journal and appreciate how much my dividends have increased.
I would think that a major benefit of dividend investing is that calculating portfolio size needed is not relevant. We don't care about the value of the portfolio. We care about the sustainable income it pays. As you invest you can gradually see the income rise as you invest more and pull the retirement trigger when it's high enough regardless of the market sentiment.
@@miked412 by calculating how much additional income the contributions produce and estimating how that income rises. the capital value will fluctuate up and down over time so the amount of income new additions give you varies. so capital value being high with a market yielding 2% is no worse for retirement than the same portfolio at a different timepoint where the capital value is half and so the yield is 4%. so long as the yield is sustainable in real terms the capital value being half does not matter. its the same income stream at a different moment of low market sentiment vs high market sentiment.
@@miked412Dividends are a $ amount per share per quarter or whatever interval the stock pays out. As long as you don’t sell any shares, you’ll receive the same dividend every period. The when the company raises the dividend, you get a raise.
I disagree, you don’t want your capital to disappear in order to pay for distributions. My preference is high yields with relatively lower risk. In other words, I don’t want to use covered call ETFs, for example.
@@wcg66 yes. that's why i was careful to say... "We care about the sustainable income it pays" key word being "sustainable". that normally means not too high yield traps. if the income stream proves sustainable and increasing i think the capital value will follow in the fullness of time but no need to delay retirement simply because the market is at a low eb. it's cyclical so it is bound to have it's low and high moments. i actually think you do agree with me if you focus on the word "sustainable" that i used. your approach sound a lot like what i meant when i used that word.
Just started buying SCHD. Just accumulating several shares a month. One day I think my daughter will have a great little chunk to generate her passive income.
I’d recommend making a trust and having that trust own that account so you can ensure your daughter doesn’t accidentally blow that money and you won’t have to worry about certain probate taxes. I’d definitely work on teaching your child the foundation so when the time comes she can grow it and live on it to pass it on to the next generation the way you are doing.
Excellent video. I am a passive income investor, which means in retirement, I can avoid sequence of return risk and leave a legacy to my family. But I recognize it isn’t the only approach. Others have their merits.
If the Government can pull 130 billion out of thin air to give to Ukraine, they can toss billions into Social Security to repay what they have "borrowed" over the decades
@@helloitsmehbnah I don't know about millions of people but if I pay into that program my whole life and get nothing.....I won't be on the street I'll be in prison lol
54 years old and at $5,000 a month dividends. I reinvest still as I’m working currently. One day, I’ll transition to part time work and supplement my income with dividends
if some of that is in a taxable account have you thought of buying brk, so there no dividents so you dont have to worry about taxes on it untill you sell
Thank you for the high dividend ETF suggestion. I'm not big on individual stock purchases for myself since I bought at the high and sold at the low several times in my 20's.
Like me you panic sold....not good.....panic selling and excessive trading will get nobody anywhere😢 the last 2 years I have sold nothing...stay the course the market is a marathon not a sprint...
For dividends living, you need minimum a 300k portfolio with 8% div yield to get 24k yearly or 2k monthly dividends. Thats the bare minimum with highest paying stable dividends etfs like jepq.
That's the average tho. If the market tanks right before you retire you'll be selling low and never make that money back. The numbers show that an average stock portfolio runs out of money in ten years if you retire right when there's a crash. It works out much better if you retire when the market goes up for several years first.
Great video, since I have become a dividend investor the entire investment game has changed. Less volatility and more buying opportunities that actually have delivered gains for me to reach my goal much quicker despite popular belief..
Isn't Simon Property Group a REIT (Real Estate Investment Trust)? Dividend from a REIT is taxed as ordinary income instead of being taxed as qualified dividends at a lower rate. There are also other tax implications associated with investing in a REIT.
At current market current prices and so on i would need around 4-500.000 $ to almost match my salary of today. And in Sweden we have pension and such so for me building a dividend portfolio is to bring more value to life . A few years before retiering i can work 4 days a week instead of 5 and such
I look for dividend "aristocrats" and other smaller individual stocks. set a goal of how many shares i want in each and let it reinvest since its better than zero income at retirement.
I'm just the opposite. I invest for total return and ignore what portion of that return is dividends versus capital gains. As long as I spend less than total return, portfolio values increase. Dividend investing is enormously popular among retirees. And people tend to do better when they are emotionally comfortable with an investment strategy. But I have always made more money from capital gains, so I don't understand ignoring what I consider the most important investment results. Dividends are an important component of total return, but they show up in my accounts whether I look at them or not. Of course, dividend investors get to keep capital gains whether they ignore them or not. But not if they chase yield, buying stocks like T or GE in 2000.
The dividend stocks he mentioned can be expect to return another 5% to 10% in capital appreciation along with increasing the dividend amount by 5% to 10% per year.
What? Tell me what investment is guaranteed ( not to crash and burn). I’ve been through a few crashes and there isn’t time left for those who are close to retirement or already retired if there is a crash. Solid dividend companies are a good bet. You can keep your Apple stocks. They make millions and give nothing to their investors.
This analysis is good. But people should never forget about the "T" word. I refer, if course, to Taxes, both Federal and, as applicable, State and Local Taxes. For Federal Taxes, some dividends may be qualified, meaning that lower rates may apply, similar to capital gains rates. But certain dividends may be considered to be ordinary income, which are typically higher rates. State and Local Tax rates, when they apply, are typically on a percentage basis, sometimes with different brackets, depending on the dollar amount of dividends generated. So, while sound diversification of income-producing stocks should be done to reduce risks, each person has to take his/her individual tax situation into account so that the proper rates can be applied and determined (or estimated) for each stock investment. And while many States don't tax Social Security benefits, if your dividend income is sufficiently high, as much as 85% of your Social Security benefits could be subject to Taxation, depending on your personal Federal tax bracket. So, don't automatically assume that all your Social Security benefits are yours to keep. [Although there's been talk of eliminating the perncious Taxation of Social Security benefits (basically a tax on the SS taxes you've paid in), Congress will just keep kicking the SS can down the road until forced to implement changes.]
This a good video but your scenario also depends on the stability of social security. I do believe SS will be there in some form going forward but the future payouts that are promised today maybe only 70=80%, or they'll have to raise the age to start collecting or raise FICA taxes. All three options are not popular.
Older people vote in much higher percentages than younger people. That makes it more likely that either FICA taxes will be raised or the retirement age will be raised (again) than a decrease in benefits. Raising the cap on income so that higher incomes pay FICA taxes is another way to go.
This video is not correctly titled. It's about living off dividends AND other streams of income. Fact is you do need a few million to actually live off dividends . 😮
5600 DIV from TSLY in June, I am loving this ETF. Just 200,000 in TSLY will give you 12,270 shares at 0.81 shares is 9,939 a month. You could easily retire off of TSLY and yes the div will change each month but if you believe in Tesla going up then TSLY DIV will also go up! I am retired and all i care about is dividends!
How about live off of interest? Savers are finally being rewarded. 5% CD’s and treasury bills with no risk of principle. 6% corporate bonds that are highly rated. TIPS at 2% plus inflation. 42/58 allocation. Interest from fixed income + dividends from stock allocation > expenses = a great nights sleep.
One thing my advisor pointed out to me was to factor in inflation. So if I want 5k/mo in today's value, what will that be when I want to retire? Same for my bills. It was annoyingly helpful.
@@RootFP i figured out on how much money I need and how many stocks dividends companies I need to get I want to make $20k a month so I would need to invest in 12 monthly stocks dividends companies invest enough to make $750.00 in each 12 monthly stocks dividends companies now to make extra $11k to make up the $20k a month I need to invest in four different quarterly stocks dividends companies to make $2,750.00 so four times that amount is $11k quarterly four times a year so $9k plus $11k =$20k a month 50% monthly and 50% quarterly but for me cheap stocks dividends companies shares is the only way to go so that is $152k a year that's enough money for me
With the way things are moving ,I think I need to see a video on “how to survive amidst the present recession “.I mean everything in shambles Surprisingly I heard people still make over a 100k within a few months ,and i’d like to know how and if it’s still possible in these times or am I being lazy
Wow that is way too many. Zero chance you can keep track of all those stocks. Zero chance you have an efficient portfolio. Monte Carlo analysts has shown about 30 stocks is all you need for a diversified portfolio anything more is a waste of time. Also you can get the exact same benefit with about 10 etf dividend funds with far less risk than having 150 individual stocks.
You need to take into account the impact of inflation. You calculated the size of a portfolio needed to generate 24,000 per year with a hypothetical 3.5% yield. In your first year, you would be close to being correct but if inflation was running at 7% in ten years you would need about double that amount to generate the same purchasing power.
The way I have done it was buying a few hundred individual dividend stocks and over time I build up shares in the more promising and time tested stocks as I go. It's been working good for me so far. I re invest all the dividends. Just how I do it. Not advice.
I can't stop laughing on the 3% yield. I'm 70, retired and have had a portfolio yielding 10.59% in dividend income for over 10 years. Fluctuates as the value of my portfolio goes up and down with the market but the yield has been pretty consistent. I should mention I acquired a lot knowledge on what moves these stocks and I track micro and macro economic issues as well as commodity prices and interest rates. Takes about an hour of my day 5 day/week but it's allowed me to have a nice dividend yield. And, I've never grabbed all the dividend income and always have enough to continue re-investing into my portfolios.
I have a part of my portfolio - $400K - that I won’t need to touch for 3 years. If you were in this situation, where would you invest? (Between my wife and me, we have $100K/yr in combined pension and SS income)
Knowledge matters. So does comfort, this is why people rely of financial professionals. If you are willing to learn you can skip paying a financial pro and increase your returns by skipping their fees.
I am 74. How I wish I had this financial advise presented so clearly years ago. My husband and I stumbled through investing and did a fair job but we could be so much better off if we had someone that presented this so clearly to our younger selves.
Be careful about REITs and other real-estate based funds as they are highly sensitive to interest rates. Equities may be volatile, but if you go for a dividend aristocrat, even though the yield is not as juicy, you will be in more consistent passive income building situation
those income amounts work nice if they're net after taxes. you're gonna need more income before taxes to get those net amounts, depending on your state. Unless my math is wrong? For an easy example, let's say I want $7000 / month net, and I get $2000 / month from social security, I need $5,000 net per month more. So for the year, I get $24,000 from social security and need $60,000 in dividend income. In my state, using those numbers, I have a pre-tax income of $80,000 - $12,679 (Federal and State taxes) = $67,321 net income after taxes, which is net $5,610.08 per month, not $7,000 / month I wanted. To get $7,000 per month after taxes with $20,000 from social security per year, I'd need $84,000 pre-tax in dividend income = $104,000 - $19,339 (Fed & State taxes) = $84,661 annual income after taxes = $7,055.08 net income per month. What am I missing?
Yes, all well and good but what you have not covered is what happens when the stock go down. If you are reliant on this in order to have passive income or be able to retire then it’s not ideal as the stock are so volatile it would not be something that I would rely on.
What about income funds do they work the same such as vanguard windsor admiral fund? Is it the same benefit just a basket of stocks vs individual stocks?
It looks like the safer route is the dividend fund. what is the most efficient way to transition your portfolio as you approach retirement? gradually or just rip off the bandaid?
There's a major flaw with the premise of getting something from social security... if you're a millennial (1980) or younger you're probably not going to get much unless perhaps you earn a very high income and contribute quite a lot during your career or some very major reforms are successfully implemented.
I want a balanced portfolio, with growth investments, safe investments, and also a focus on dividends to gain up to $20K monthly with minimal risk. is this your strategy sustainable?
I don't understand the formula desired-annual-income / percentage-of-revenue-paid-aa-dividends Shouldn't the revenue of the company be included in the formula to know how much will actually be distributed?
Like what you said about diversity of investments. Unless you have money to burn it is hard to rely on just one thing. Maybe in this case "diversity is our strength" could really be true.
Sure but some people are so focused on living on dividends alone that they think it’s impossible (forgetting that you can support like mt your income other ways too) so they don’t do anything for their retirement at all. This gives them, and us, a good way to diversify our income and think of what works best for us because you do need a decent amount to just live off of dividends rather than other income sources.
You pay no tax on long term capital gains until a certain level. Your dividends and interests are charged as regular income EVEN IF they are reinvested. Hence I is always better to go for fast growing companies over stable high dividend companies.
What are the quality companies that pay good dividends that are NOT subject to dropping in value when the FED decides inflation is to high and they raise rates?
Exxon Mobil Corp. (ticker: XOM) Campbell Soup Co. (CPB) Williams Cos. Inc. (WMB) Coca-Cola Co. (KO) Genuine Parts Co. (GPC) Equinix Inc. (EQIX) Cisco Systems Inc. (CSCO) Texas Instruments Inc. (TXN) Johnson & Johnson (JNJ) you are welcome
SS is pretty much sure to be tits up long before I'll be old enough to draw it. I plan on 4 percent dividend and need about 40k a year to cover life's basic costs. It takes a lot of money.
SS better not be bust. That is not their money, I paid it and Uncle Sam didn’t pay me ANY interest! Vote Democrat if you want to see the Government default for the third time( 1933 Roosevelt, 1971 Nixon, ? Next Democrat President)
My goal is about 10k a month…. Me and my wife both get a pension at 55 so that should be about 7k/8k a month plus social security and rental properties plus dividends should bring us about 22k a month so we could enjoy retirement
Great points. I’m trying to talk my daughter and her husband into investing in. Roth IRA before investing into a regular taxed account even for her emergency fund . For tax purposes because they can take initial money out penalty free and may not need it anyway. I’m my mind I’m thinking take advantage of tax breaks for as much as possible. Then open a regular taxed account. Am I right or wrong in my thinking please ?
You are correct! Get any matching 401k and HSA funds through work first. Then both need to max out their own Roth. And try their best to never touch their Roth. The long term advantages are huge. It makes tax planning in retirement so much easier.
Something people also forget is that if you have a million dollars for example in your portfolio and you're living off your dividends, you still have that million dollars. You could have no dividends and still make 40k a year for 25 years after retirement just by siphoning off your investments
How is living off of 3% dividend stocks different than living off off non-dividend stocks by selling 3% of the stocks every year. In both cases, the dividends or stock sale reduces the value of your stock by 3% (check the adjusted closing price of your dividend stock), you pay long-term capital gains tax rates on the proceeds, and the stocks continues to grow to support future dividends or stock sales. The only difference is the total return of the underlying stock(s). Dividend stocks don't necessarily have more total return than non-dividend stocks.
There is such a thing as Mutual Bond funds that pay 6% dividend monthly. Many are very boring with little to no share movement up or down. Very low share price and expense ratio.
But your title is misleading. Amount needed to 'live off dividends' is very different from amount needed to supplement SS. Some of us retired decades before social insecurity age and were hoping for real info.
Yes, YT titles are notoriously misleading, I guess they just want to make sure you click. I guess the issue is what does “live off” mean? I’m with you about it being a bit dishonest, but I’m afraid we’re on the losing side.
Well, its not exactly. Start deducting taxes and inflation. From the equity point of view, there is no difference between getting dividends or selling portions of ETFs you're holding in your portfolio, but there is from how this being taxed and dividends being taxed heavily, while in some countries selling portion of ETFs is 0% taxed.
I'm figuring social security won't exist by the time I "retire" and inflation will probably mean I'll need around a 10 mil fund to generate enough dividends
Simon Property group lost about 26% of its value over the last 5 years. The “dividend” it pays is actually just about equal to the depreciated value of the stock. Woo-hoo…..I collected dividends and my portfolio went down 25+%. Why not just buy an income producing ETF or maybe Omega Healthcare Investors? Good dividends, but again some loss of value. Now me, I earn 3.6% dividend return and average about 5% appreciation in my portfolio. I don’t always own the same stocks and sometime I own CD’s and T-Bills, but I also buy companies that routinely raise their dividends. This means the stock price will appreciate as will my return on my initial invested capital. I only let my stock decline 6 quarters of dividend valuation as a stop loss. So if it drops $7 and 6 quarters of dividends was $10, I can make back my loss holding. It’s called game theory people…..cut your losses fast let your winners run
if you count $2000 from each of your SS benefits, then you aren't living off of your dividends - you are living off your SS benefits with some additional dividend income. if each of you had $2975 is SS benefits, would you say that you could live off dividends with only $1000 of dividend stocks? that would be a pretty silly thing to say. you would be living off your SS benefits - not dividends.
New to this but would like to know where and how I can invest say $20k to start with. what web site do I look into investing in stocks that pay dividends. I would like to invest enough to make $1,000 to $1500 a month since I am already 76 years old and stable I would like to make that much to call vacation or fun money. I have at least $300k cash to totally get into it once I feel comfortable. Because of age i don't need long term investments since I already have a 401K which I pull 8% out of TY
I am 72 and I can tell you income is so important in retirement and as you age. There is no simple formula, but you want sufficient cash flow with little worry to be happy. For people planning retirement it is still theoretical. But when it is real time, you want stability...
Did you re-invest your dividend? I am. How much , for example, how much Coke-Cola in share would I need to have payments to live off of $40000/year??
@@stevenharris6626Why would you only invest into one stock like KO when you can diversify your portfolio with ETFs, Covered Call ETFs, and REITs?
Fear. Uncertainty. Doubt.
You will never have enough to not worry.
This is not a numbers issue.
@@sammencia7945, In this case vote for right people!
I am a retired, 70-year old first-time buyer, and managed save enough money to pay cash for a house… also, I have a monthly pension that will cover utilities, maintenance and insurance; however, I am still nervous/anxious/leery of taking the house purchase plunge for what will be my “forever home”.
I look for dividend "aristocrats" and I prefer monthly dividends though quarterly is ok. Right now I have $20,000 in stocks and it projects to $1,253 in annual dividends. I'm aiming for $1,000/month in dividend income.
So you need about $240,000 invested seems like
@@Enmanuel_V6 Yeah but how many have it?
@@donaldlyons17 Don’t forget the snowball effect. With enough time you won’t have to invest $240,000 to have a portfolio worth $240,000.
Don’t forget the snowball effect. With enough time you won’t have to invest $240,000 to have a portfolio worth $240,000.
@@donaldlyons17 I won’t listen to a simp like you
I’m living the dream with dividends almost $25,000 a year
that would be enough for me
Until it’s yanked from you. You’re at the mercy of a corporate board. That’s sounds scary.
@@helloitsmehbIf he has enough to earn $25k/year in dividends, he likely has enough to draw down on his balance to meet his needs, should the dividends disappear. I'd rather have my dividends disappear than not invest because of fear.
you and me dream different
@@helloitsmehb same thing with anything in life: diversify
You left out one major consideration of having a dividend portfolio. T%hat is the favorable tax treatment of qualified dividends. In your example, a couple with $24K per year in dividends and 48K per year in social security, their income would make $9,400 of their social security taxable. However, at the $72K gross income the tax rate for the $24K of dividends would be 0%. Thus the total taxable income for the couple would be $9,400. In 2023 assuming the couple are both 65 or older the standard deduction is $30,700, so the couple would pay no federal income tax. Similarly if the same couple took $24K out of their 401K, IRA of from pension income, their taxable income would be $9,400+$24,000 = $33,400. After the standard deduction they would owe tax on $2,700 or $270 in 2023. This become a significant factor as income increases. If their income was $90K, taxable income would be $41,400 if the money came from a 401K etc. and the tax owed would be $1,070. If that same money came from dividends the taxable SS would increase to $24.7K with the dividends still taxed at 0% giving taxable income of $24,7K, which is still less than the standard deduction so no tax would be payable. That couple could have a gross income up to about $108K before any of their dividend income would be taxable, where the tax saving due to dividend income would be about $6,500 at $108K total income. If your dividend portfolio is paying say 3.25%, the tax saving is the equivalent of about $200K in your dividend portfolio. Note this is just the federal tax situation. Obviously state taxes also need to be considered.
This just illustrates that any retirement financial plan must include tax planning.
Nice info thanks
My current plan would be to utilize the Roth IRA/ Roth 401k function and then you won’t have any income either.
Yeah, Todd. I've seen a few of James' videos. He glosses over some of the more salient points, regularly. I believe his videos are just to generate the RUclips revenue for his family. If he were to give all his knowledge and advice in a single, coherent video, then I'm sure it would be phenomenal. Unfortunately, it would also be several hours long and RUclips wouldn't pay him anymore (having only a single video). But I agree, I do wish he would at least make reference to some critically-important, related topics.
You've made some good points. Thanks for this information.
Most CFP don't talk about dividend stocks. This is great to hear from CFP
They are terrible
I use growth stocks to add to my dividends. Im 40 and once I get to a certain level on my growth stocks, Ill take some profits and add to my dividend stocks. Then Ill look for more growth stocks and add to those with some profits.
This is what I do my G 👊👊😎...we in it ride or die for life lol
No federal tax on 120k of investments bought over a year ago if married ❤
Your wife will be grateful
Our advisor has us invested to earn dividends, withdrawing $5,800/month. We are not withdrawing all we earn monthly. Add to that $4,600/month in SS and we’re doing just fine. You hit the nail on the head.
Now... all you have to do is get rid of your advisor.
Which stock may I ask?
Would you mind passing on your advisors contact information?
Lying scammer!
Amazing that a CFP speaks about dividends in a positive way... unless youre way into retirement... Love dividends and the snowball effect... Thanks for the great video.... Very well done.... Great information....
I keep an investment journal and the main item I record almost daily is my projected annual dividends, not my stock valuation. Then when the market goes haywire, I just look at my investment journal and appreciate how much my dividends have increased.
When the market goes haywire that’s when dividends are yanked from investors. It just happened 4 years ago. Were you not watching?
Hate to say it, but I wouldn't count on a spouse for the funding of any of your retirement.
Then you need to find a better spouse haha. I'm retired at 24 and it's because of my wife. Doing things alone takes twice as long.....
@@Sylvester4571 retired at 24, sure you did!
I agree, never rely on anyone but yourself.
@@nightskylights4501he meant 14…😊
I would think that a major benefit of dividend investing is that calculating portfolio size needed is not relevant. We don't care about the value of the portfolio. We care about the sustainable income it pays. As you invest you can gradually see the income rise as you invest more and pull the retirement trigger when it's high enough regardless of the market sentiment.
Calculating the portfolio size needed is very relevant.
- How else do you know how much to contribute?
@@miked412 by calculating how much additional income the contributions produce and estimating how that income rises. the capital value will fluctuate up and down over time so the amount of income new additions give you varies. so capital value being high with a market yielding 2% is no worse for retirement than the same portfolio at a different timepoint where the capital value is half and so the yield is 4%. so long as the yield is sustainable in real terms the capital value being half does not matter. its the same income stream at a different moment of low market sentiment vs high market sentiment.
@@miked412Dividends are a $ amount per share per quarter or whatever interval the stock pays out. As long as you don’t sell any shares, you’ll receive the same dividend every period. The when the company raises the dividend, you get a raise.
I disagree, you don’t want your capital to disappear in order to pay for distributions. My preference is high yields with relatively lower risk. In other words, I don’t want to use covered call ETFs, for example.
@@wcg66 yes. that's why i was careful to say... "We care about the sustainable income it pays" key word being "sustainable". that normally means not too high yield traps. if the income stream proves sustainable and increasing i think the capital value will follow in the fullness of time but no need to delay retirement simply because the market is at a low eb. it's cyclical so it is bound to have it's low and high moments. i actually think you do agree with me if you focus on the word "sustainable" that i used. your approach sound a lot like what i meant when i used that word.
Just started buying SCHD. Just accumulating several shares a month. One day I think my daughter will have a great little chunk to generate her passive income.
That is awesome!
I’d recommend making a trust and having that trust own that account so you can ensure your daughter doesn’t accidentally blow that money and you won’t have to worry about certain probate taxes. I’d definitely work on teaching your child the foundation so when the time comes she can grow it and live on it to pass it on to the next generation the way you are doing.
Excellent video. I am a passive income investor, which means in retirement, I can avoid sequence of return risk and leave a legacy to my family. But I recognize it isn’t the only approach. Others have their merits.
Thank you for explaining this. I just hope that there is still social security in 15 years.
If not there will be millions of people on the streets. It will have to be there
Then don't vote for the Republicans they've been trying to kill it since its Inception
If the Government can pull 130 billion out of thin air to give to Ukraine, they can toss billions into Social Security to repay what they have "borrowed" over the decades
@@helloitsmehbnah I don't know about millions of people but if I pay into that program my whole life and get nothing.....I won't be on the street I'll be in prison lol
54 years old and at $5,000 a month dividends. I reinvest still as I’m working currently. One day, I’ll transition to part time work and supplement my income with dividends
if some of that is in a taxable account have you thought of buying brk, so there no dividents so you dont have to worry about taxes on it untill you sell
dare to share your portfolio?
Thank you for the high dividend ETF suggestion. I'm not big on individual stock purchases for myself since I bought at the high and sold at the low several times in my 20's.
Like me you panic sold....not good.....panic selling and excessive trading will get nobody anywhere😢 the last 2 years I have sold nothing...stay the course the market is a marathon not a sprint...
@@Jack51971 She could have bought and sold once or twice, though; not excessively.
For dividends living, you need minimum a 300k portfolio with 8% div yield to get 24k yearly or 2k monthly dividends. Thats the bare minimum with highest paying stable dividends etfs like jepq.
S &P 500 index funds have returned over 11% per year long term. As long as you don’t take out more than your gains, you should be fine.
We’re taking out as we please for traveling and gifting. Locked in safely 500K No debt, SS income, have plenty and as much as we started with
That's the average tho. If the market tanks right before you retire you'll be selling low and never make that money back. The numbers show that an average stock portfolio runs out of money in ten years if you retire right when there's a crash. It works out much better if you retire when the market goes up for several years first.
yikes! you missed the whole point! how much do you need in the index fund to live on is what we are discussing here.
Great video, since I have become a dividend investor the entire investment game has changed. Less volatility and more buying opportunities that actually have delivered gains for me to reach my goal much quicker despite popular belief..
Until it’s taken away. You’re at the mercy of a board
SCHD is a great dividend ETF, with its popularity I wonder if vanguard and black rock will come out with etfs that track index’s like the DJ US 100
spyd?
Proctor & Gamble is another good one...
Isn't Simon Property Group a REIT (Real Estate Investment Trust)? Dividend from a REIT is taxed as ordinary income instead of being taxed as qualified dividends at a lower rate. There are also other tax implications associated with investing in a REIT.
I inherited a small IRA. I refocused the account to provide some growth and enough dividends to cover my RMD.
Do you have to pay taxes when you inherit the ira?
Great video! Thanks for the clear explanation of dividends payouts. Many forget to include other income like social security into the total amount.
You need to focus on type of dividend payment and how it it taxed VIP not all dividends hit the 10% mark and some are taxed at your income rate
At current market current prices and so on i would need around 4-500.000 $ to almost match my salary of today.
And in Sweden we have pension and such so for me building a dividend portfolio is to bring more value to life .
A few years before retiering i can work 4 days a week instead of 5 and such
Glad it was helpful!
I look for dividend "aristocrats" and other smaller individual stocks. set a goal of how many shares i want in each and let it reinvest since its better than zero income at retirement.
Wonderful!
I'm just the opposite. I invest for total return and ignore what portion of that return is dividends versus capital gains. As long as I spend less than total return, portfolio values increase. Dividend investing is enormously popular among retirees. And people tend to do better when they are emotionally comfortable with an investment strategy. But I have always made more money from capital gains, so I don't understand ignoring what I consider the most important investment results. Dividends are an important component of total return, but they show up in my accounts whether I look at them or not. Of course, dividend investors get to keep capital gains whether they ignore them or not. But not if they chase yield, buying stocks like T or GE in 2000.
I'm glad you added the comment about investing in more the just dividends, James. A 3-4% return from stocks, given all the risks, is terrible.
The dividend stocks he mentioned can be expect to return another 5% to 10% in capital appreciation along with increasing the dividend amount by 5% to 10% per year.
What? Tell me what investment is guaranteed ( not to crash and burn). I’ve been through a few crashes and there isn’t time left for those who are close to retirement or already retired if there is a crash. Solid dividend companies are a good bet. You can keep your Apple stocks. They make millions and give nothing to their investors.
This analysis is good. But people should never forget about the "T" word. I refer, if course, to Taxes, both Federal and, as applicable, State and Local Taxes. For Federal Taxes, some dividends may be qualified, meaning that lower rates may apply, similar to capital gains rates. But certain dividends may be considered to be ordinary income, which are typically higher rates. State and Local Tax rates, when they apply, are typically on a percentage basis, sometimes with different brackets, depending on the dollar amount of dividends generated. So, while sound diversification of income-producing stocks should be done to reduce risks, each person has to take his/her individual tax situation into account so that the proper rates can be applied and determined (or estimated) for each stock investment. And while many States don't tax Social Security benefits, if your dividend income is sufficiently high, as much as 85% of your Social Security benefits could be subject to Taxation, depending on your personal Federal tax bracket. So, don't automatically assume that all your Social Security benefits are yours to keep. [Although there's been talk of eliminating the perncious Taxation of Social Security benefits (basically a tax on the SS taxes you've paid in), Congress will just keep kicking the SS can down the road until forced to implement changes.]
This a good video but your scenario also depends on the stability of social security. I do believe SS will be there in some form going forward but the future payouts that are promised today maybe only 70=80%, or they'll have to raise the age to start collecting or raise FICA taxes. All three options are not popular.
Older people vote in much higher percentages than younger people. That makes it more likely that either FICA taxes will be raised or the retirement age will be raised (again) than a decrease in benefits. Raising the cap on income so that higher incomes pay FICA taxes is another way to go.
Between my (partial) work pension and social security, I hope to have about 400k from other investments. I hope to take that and generate 24k.
This video is not correctly titled. It's about living off dividends AND other streams of income. Fact is you do need a few million to actually live off dividends . 😮
really? your picking on his video? you dont have a fraction of the knowledge he has..
Between 2-3 million.
5600 DIV from TSLY in June, I am loving this ETF. Just 200,000 in TSLY will give you 12,270 shares at 0.81 shares is 9,939 a month. You could easily retire off of TSLY and yes the div will change each month but if you believe in Tesla going up then TSLY DIV will also go up! I am retired and all i care about is dividends!
Don’t forget Tesla is mainly a car company and it’s stock is falling, as you know. I worry it’s a ‘value’ trap like ATT or GE. BEST OF LUCK.
How about live off of interest? Savers are finally being rewarded. 5% CD’s and treasury bills with no risk of principle. 6% corporate bonds that are highly rated. TIPS at 2% plus inflation. 42/58 allocation. Interest from fixed income + dividends from stock allocation > expenses = a great nights sleep.
One thing my advisor pointed out to me was to factor in inflation. So if I want 5k/mo in today's value, what will that be when I want to retire? Same for my bills. It was annoyingly helpful.
Good point. The calculation should be based on how much you’ll need at retirement.
@@RootFP i figured out on how much money I need and how many stocks dividends companies I need to get I want to make $20k a month so I would need to invest in 12 monthly stocks dividends companies invest enough to make $750.00 in each 12 monthly stocks dividends companies now to make extra $11k to make up the $20k a month I need to invest in four different quarterly stocks dividends companies to make $2,750.00 so four times that amount is $11k quarterly four times a year so $9k plus $11k =$20k a month 50% monthly and 50% quarterly but for me cheap stocks dividends companies shares is the only way to go so that is $152k a year that's enough money for me
Wouldn’t the dividends rise with inflation, the stock value rises?
#JEPI and #PSEC are some of the best for dividends.
A glaring omission is not talking at all about how dividends are taxed and comparing them to 401K and long-term capital gains.
brilliant point, David.
With the way things are moving ,I think I need to see a video on “how to survive amidst the present recession “.I mean everything in shambles
Surprisingly I heard people still make over a 100k within a few months ,and i’d like to know how and if it’s still possible in these times or am I being lazy
Lazy 🤑
I am invested in 147 different dividend paying companies ,all I got say is diversify
149 now
Glad it was helpful!
Wow that is way too many. Zero chance you can keep track of all those stocks. Zero chance you have an efficient portfolio. Monte Carlo analysts has shown about 30 stocks is all you need for a diversified portfolio anything more is a waste of time. Also you can get the exact same benefit with about 10 etf dividend funds with far less risk than having 150 individual stocks.
You need to take into account the impact of inflation. You calculated the size of a portfolio needed to generate 24,000 per year with a hypothetical 3.5% yield. In your first year, you would be close to being correct but if inflation was running at 7% in ten years you would need about double that amount to generate the same purchasing power.
Dividends have historically increased at a faster pace than inflation. It’s no guarantee for the future, but worth noting.
The way I have done it was buying a few hundred individual dividend stocks and over time I build up shares in the more promising and time tested stocks as I go. It's been working good for me so far. I re invest all the dividends. Just how I do it. Not advice.
Diversification is key, a mix of interest, dividends, rent and even royalty would be good for a passive income portfolio.
let me guess. you are not a landlord.
Thank you for your common sense approach to retirement saving and investing. The big companies have long given horrible advice in this area.
Great video with great explanation James.
I can't stop laughing on the 3% yield. I'm 70, retired and have had a portfolio yielding 10.59% in dividend income for over 10 years. Fluctuates as the value of my portfolio goes up and down with the market but the yield has been pretty consistent. I should mention I acquired a lot knowledge on what moves these stocks and I track micro and macro economic issues as well as commodity prices and interest rates. Takes about an hour of my day 5 day/week but it's allowed me to have a nice dividend yield. And, I've never grabbed all the dividend income and always have enough to continue re-investing into my portfolios.
I have a part of my portfolio - $400K - that I won’t need to touch for 3 years. If you were in this situation, where would you invest? (Between my wife and me, we have $100K/yr in combined pension and SS income)
Knowledge matters. So does comfort, this is why people rely of financial professionals. If you are willing to learn you can skip paying a financial pro and increase your returns by skipping their fees.
There are so many other/better options besides dividends. But it works it you know how to work it. Good on you!
I am 74. How I wish I had this financial advise presented so clearly years ago. My husband and I stumbled through investing and did a fair job but we could be so much better off if we had someone that presented this so clearly to our younger selves.
advice
Svol 16%, Jepq 9.5% ….don’t need much to get 24k
Be careful about REITs and other real-estate based funds as they are highly sensitive to interest rates. Equities may be volatile, but if you go for a dividend aristocrat, even though the yield is not as juicy, you will be in more consistent passive income building situation
those income amounts work nice if they're net after taxes. you're gonna need more income before taxes to get those net amounts, depending on your state. Unless my math is wrong?
For an easy example, let's say I want $7000 / month net, and I get $2000 / month from social security, I need $5,000 net per month more. So for the year, I get $24,000 from social security and need $60,000 in dividend income.
In my state, using those numbers, I have a pre-tax income of $80,000 - $12,679 (Federal and State taxes) = $67,321 net income after taxes, which is net $5,610.08 per month, not $7,000 / month I wanted.
To get $7,000 per month after taxes with $20,000 from social security per year, I'd need $84,000 pre-tax in dividend income = $104,000 - $19,339 (Fed & State taxes) = $84,661 annual income after taxes = $7,055.08 net income per month.
What am I missing?
Agreed tax needs to be taken into account.
Yes, all well and good but what you have not covered is what happens when the stock go down. If you are reliant on this in order to have passive income or be able to retire then it’s not ideal as the stock are so volatile it would not be something that I would rely on.
Thank you, James. Very helpful. Lots of issues to consider, especially all tax implications.
What about income funds do they work the same such as vanguard windsor admiral fund? Is it the same benefit just a basket of stocks vs individual stocks?
It looks like the safer route is the dividend fund. what is the most efficient way to transition your portfolio as you approach retirement? gradually or just rip off the bandaid?
gradually
There's a major flaw with the premise of getting something from social security... if you're a millennial (1980) or younger you're probably not going to get much unless perhaps you earn a very high income and contribute quite a lot during your career or some very major reforms are successfully implemented.
Right. Because social security assumes you worked your ass off for many years, and millennials don’t do that.
this is for people who earn a very high income. this video was not made for you.
Not individual stocks. ETFs that have 10% monthly dividends are out there.
I just need 2k a month in Div. with Social Security of 2.5k.
I want a balanced portfolio, with growth investments, safe investments, and also a focus on dividends to gain up to $20K monthly with minimal risk. is this your strategy sustainable?
Epic video and breakdown 👍🏼🙏🏽🙌🏼🏆keep giving us more useful dividend videos!! Your the bomb 💣
Liked and subbed ! Very simple and informative !
¡Excelente! Gracias. 😁🇵🇷
I don't understand the formula desired-annual-income / percentage-of-revenue-paid-aa-dividends
Shouldn't the revenue of the company be included in the formula to know how much will actually be distributed?
Awesome stuff and spot on. So good, I subscribed.
Thank you, this is an excellent video and appreciate the explanation!
Glad you enjoyed it!
Like what you said about diversity of investments. Unless you have money to burn it is hard to rely on just one thing. Maybe in this case "diversity is our strength" could really be true.
Why do dividends? Seems like investing in high performing stocks, and slowly selling those down to get your income would be a greater overall return?
because you have to sell them. run to your home, fall upon your knees, and re think your life.
Not to nitpick but if you include pension, SS and real estate income you are not living off of dividends, still good points in this video...
Sure but some people are so focused on living on dividends alone that they think it’s impossible (forgetting that you can support like mt your income other ways too) so they don’t do anything for their retirement at all. This gives them, and us, a good way to diversify our income and think of what works best for us because you do need a decent amount to just live off of dividends rather than other income sources.
Very informational.
Great video. Very clear.
I like these 2 etf. They pay monthly and see for about mid 50s. Jepq. Jepi. 10%
I invest vymi, vym and vnq
Instead of stocks, is it possible to do this by investing in dividend-paying index funds and ETFs?
3.72 PERCENT dividend yield seems like a really lousy return on investment. Inflation is really high nowadays.
constructive comments only. what is your plan?
Great video, very informative.
Thank you Sandy
You pay no tax on long term capital gains until a certain level. Your dividends and interests are charged as regular income EVEN IF they are reinvested. Hence I is always better to go for fast growing companies over stable high dividend companies.
What are the quality companies that pay good dividends that are NOT subject to dropping in value when the FED decides inflation is to high and they raise rates?
Exxon Mobil Corp. (ticker: XOM)
Campbell Soup Co. (CPB)
Williams Cos. Inc. (WMB)
Coca-Cola Co. (KO)
Genuine Parts Co. (GPC)
Equinix Inc. (EQIX)
Cisco Systems Inc. (CSCO)
Texas Instruments Inc. (TXN)
Johnson & Johnson (JNJ)
you are welcome
SS is pretty much sure to be tits up long before I'll be old enough to draw it. I plan on 4 percent dividend and need about 40k a year to cover life's basic costs. It takes a lot of money.
SS better not be bust. That is not their money, I paid it and Uncle Sam didn’t pay me ANY interest! Vote Democrat if you want to see the Government default for the third time( 1933 Roosevelt, 1971 Nixon, ? Next Democrat President)
My goal is about 10k a month…. Me and my wife both get a pension at 55 so that should be about 7k/8k a month plus social security and rental properties plus dividends should bring us about 22k a month so we could enjoy retirement
Sweet
6.2% with stock market risk vs 5.27 % savings account return with no risk if under 250k. Not worth the risk.
Very helpful information! Thanks a lot for making this video!
How would someone do a search on just qualified dividends? Maybe specifically ETF's.
i pity the fools who have never heard of google
Great points. I’m trying to talk my daughter and her husband into investing in. Roth IRA before investing into a regular taxed account even for her emergency fund . For tax purposes because they can take initial money out penalty free and may not need it anyway. I’m my mind I’m thinking take advantage of tax breaks for as much as possible. Then open a regular taxed account. Am I right or wrong in my thinking please ?
You are correct! Get any matching 401k and HSA funds through work first. Then both need to max out their own Roth.
And try their best to never touch their Roth. The long term advantages are huge. It makes tax planning in retirement so much easier.
When you retire if your stocks held in a Roth produce dividends, they are or not taxed?
yes
If they are in a Roth, they are not taxed.
Something people also forget is that if you have a million dollars for example in your portfolio and you're living off your dividends, you still have that million dollars. You could have no dividends and still make 40k a year for 25 years after retirement just by siphoning off your investments
not leaving anything to your kids, are you?
How is living off of 3% dividend stocks different than living off off non-dividend stocks by selling 3% of the stocks every year. In both cases, the dividends or stock sale reduces the value of your stock by 3% (check the adjusted closing price of your dividend stock), you pay long-term capital gains tax rates on the proceeds, and the stocks continues to grow to support future dividends or stock sales. The only difference is the total return of the underlying stock(s). Dividend stocks don't necessarily have more total return than non-dividend stocks.
There is such a thing as Mutual Bond funds that pay 6% dividend monthly. Many are very boring with little to no share movement up or down. Very low share price and expense ratio.
Which?
But your title is misleading. Amount needed to 'live off dividends' is very different from amount needed to supplement SS. Some of us retired decades before social insecurity age and were hoping for real info.
It is simple....the amount of money you have to invest, what stock, what yield....😊
Yes, YT titles are notoriously misleading, I guess they just want to make sure you click. I guess the issue is what does “live off” mean? I’m with you about it being a bit dishonest, but I’m afraid we’re on the losing side.
Well, its not exactly. Start deducting taxes and inflation. From the equity point of view, there is no difference between getting dividends or selling portions of ETFs you're holding in your portfolio, but there is from how this being taxed and dividends being taxed heavily, while in some countries selling portion of ETFs is 0% taxed.
I'm figuring social security won't exist by the time I "retire" and inflation will probably mean I'll need around a 10 mil fund to generate enough dividends
are you mrpsquared01 or chickenlittle01
Simon Property group lost about 26% of its value over the last 5 years. The “dividend” it pays is actually just about equal to the depreciated value of the stock. Woo-hoo…..I collected dividends and my portfolio went down 25+%. Why not just buy an income producing ETF or maybe Omega Healthcare Investors? Good dividends, but again some loss of value.
Now me, I earn 3.6% dividend return and average about 5% appreciation in my portfolio. I don’t always own the same stocks and sometime I own CD’s and T-Bills, but I also buy companies that routinely raise their dividends. This means the stock price will appreciate as will my return on my initial invested capital. I only let my stock decline 6 quarters of dividend valuation as a stop loss. So if it drops $7 and 6 quarters of dividends was $10, I can make back my loss holding. It’s called game theory people…..cut your losses fast let your winners run
because there is loss of value, of course
Another awesome video!
Fantastic video! Thank you.
if you count $2000 from each of your SS benefits, then you aren't living off of your dividends - you are living off your SS benefits with some additional dividend income. if each of you had $2975 is SS benefits, would you say that you could live off dividends with only $1000 of dividend stocks? that would be a pretty silly thing to say. you would be living off your SS benefits - not dividends.
Ty
I've got an average 50$ a month in spending money. How do I turn that into the 300+k a month in stocks I'd need?
why not just put it all on a high income etf that's safe like SPYI?
i pity the fools who don't diversify
Thank you. Good info,
good information!
New to this but would like to know where and how I can invest say $20k to start with. what web site do I look into investing in stocks that pay dividends. I would like to invest enough to make $1,000 to $1500 a month since I am already 76 years old and stable I would like to make that much to call vacation or fun money. I have at least $300k cash to totally get into it once I feel comfortable. Because of age i don't need long term investments since I already have a 401K which I pull 8% out of
TY
Fidelity and do ETFs instead of regular stocks. Less risk.
Do we have to pay taxes on dividend income in retirement?
Yes. SS is taxable (up to 85%) at the federal level. SS may not be taxable at your state level. Our state does not tax SS.
I'm from the U.K and have 600k in a money market fund which will generate about £30k tax free as this in a tax free savings account.
Treasury bills and I (eye) bonds need to be in the equation- backed by the USA guaranteed intrest !