How much capital it takes to cover your living costs from dividends, the extra things to plan for, an example mix and the honest risks of relying on dividend income.
Living off dividends means your investments, not a salary, cover your costs. The maths is simple, but the number is large and the risks are real. Start from your actual spending, find the capital it needs at a conservative yield, and then plan for the things a yield calculation leaves out: tax, cuts, inflation and a bad first few years.
Replace $3,000 with your own monthly spending. The money you need is yearly spending divided by the yield. $3,000 a month is $36,000 a year.
| Average yield | Money needed | Per year |
|---|---|---|
| 3% | $1,200,000 | $36,000 |
| 4% | $900,000 | $36,000 |
| 5% | $720,000 | $36,000 |
Before tax. Use the income goal planner to see what a specific stock or fund would need, and read how much you need to live off dividends.
Add up what you spend in a year, including irregular costs, health care and taxes. This is the number to cover, not your hoped-for lifestyle.
Divide your yearly need by a conservative yield, then compare with what you have.
Estimate how long it will take at your savings rate, and what to do if it takes longer.
Rely on many payers across sectors. One cut should hurt, not wreck the plan.
Spread payment months so cash arrives regularly, and keep a cash buffer for bad years.
Dividends are usually taxable and rules vary. Track income and review the plan at least once a year.
A balanced mix of growth, income and stability. The yields are assumed round numbers, not market data.
| Holding | Weight | Assumed yield | Amount |
|---|---|---|---|
| Dividend growth stocksCompanies that raise their dividend steadily | 30% | 2.0% | $270,000 |
| Broad US stock ETFThe whole market in one fund | 25% | 1.3% | $225,000 |
| International developed-markets ETFCompanies outside the US | 10% | 2.8% | $90,000 |
| REITsReal estate companies that pay out most of their income | 10% | 4.5% | $90,000 |
| Bond ETFPays interest, usually monthly | 25% | 4.0% | $225,000 |
A teaching example, not advice. A balanced mix has a lower average yield than the 4% shortcut, so it needs more capital for the same income. That gap is the point.
Open this mix in the calculator →All information and tools on this website are provided for informational purposes only. The calculations, examples, and projections are simplified estimates and may not reflect real-world investment results.
Nothing on this website should be interpreted as financial, investment, tax, or legal advice. You are solely responsible for your investment decisions and any outcomes resulting from them.
Past performance and projected returns do not guarantee future results. Always conduct your own research and consult a qualified financial advisor before making investment decisions.