Poll: Dividend income to match annual salary?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply

How long did it take your dividend income to match or exceed your annual salary?

1 - 10 years
0
No votes
11- 20 years
0
No votes
21 - 30 years
1
1%
31 - 40 years
2
2%
41+ years
1
1%
It has not happened yet
121
97%
 
Total votes: 125

User avatar
Topic Author
InvestorNewb
Posts: 1663
Joined: Mon Sep 03, 2012 11:27 am

Poll: Dividend income to match annual salary?

Post by InvestorNewb »

I would like to get a general idea of how long it took for your dividend income (from index funds) to match or exceed your annual salary.

For me I see this as the 'euphoria' of investing. The day that someone no longer has to worry about staying employed.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
John3754
Posts: 1289
Joined: Tue Mar 19, 2013 8:56 pm

Re: Poll: Dividend income to match annual salary?

Post by John3754 »

I plan on retiring long before my portfolio's dividend yield is anywhere near my current income level. First, my yearly spending is far less than my current income, so I don't need my portfolio to generate my current income for me to be financially independent. Second, total return is what matters, not income.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Poll: Dividend income to match annual salary?

Post by dbr »

I'm retired and it was never even close by many factors. Is this a serious question?

Just as an illustration contemplate a person with $1MM in assets and earning about 2% dividends in stocks and 2% interest on bonds. That amounts to $20,000/year. Such an individual could be earning well in excess of $100,000/year. What kind of example are you expecting?
User avatar
Ged
Posts: 3945
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: Poll: Dividend income to match annual salary?

Post by Ged »

Dividends are a side show. What counts is real return.
User avatar
Dale_G
Posts: 3466
Joined: Tue Feb 20, 2007 4:43 pm
Location: Central Florida - on the grown up side of 85

Re: Poll: Dividend income to match annual salary?

Post by Dale_G »

Never got there - and most won't. With dividends and bond returns of about 2%, I would have needed an investment portfolio of about 50 times annual wages. I retired well short of that.

Now if you want to talk total return = 2% dividends + 3% nominal capital return = 5%, that only requires a portfolio of about 20 times wages. I retired a bit short of that too :D

Anyway, good luck, I hope you make it.

Dale
Volatility is my friend
User avatar
FrugalInvestor
Posts: 6214
Joined: Thu Nov 06, 2008 11:20 pm

Re: Poll: Dividend income to match annual salary?

Post by FrugalInvestor »

I'm (early) retired and dividends are not even close to my maximum annual salary. Living beneath your means not only helps accelerate savings but also helps maintain a lifestyle and expectations that are more easily funded in retirement.
Have a plan, stay the course and simplify. Then ignore the noise!
User avatar
NightOwl
Posts: 664
Joined: Fri Feb 06, 2009 1:08 am
Location: New York, NY

Re: Poll: Dividend income to match annual salary?

Post by NightOwl »

OP, the way you are asking the question, it seems as though you think that achieving this goal would be common for members of this forum, whereas it seems to me that it would be an incredibly rare accomplishment (at least for people who got there by saving salary, not via inheritance or other major windfall).

I would consider it impressive enough for dividends to cover spending needs beyond those covered by social security and (should one be so blessed) pension -- we're talking about a roughly 2% withdrawal rate (whether achieved through dividends or total return is of small relevance). I think that very few people will get there.

NightOwl
"Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements." | Peter Bernstein, "The 60/40 Solution."
User avatar
FrugalInvestor
Posts: 6214
Joined: Thu Nov 06, 2008 11:20 pm

Re: Poll: Dividend income to match annual salary?

Post by FrugalInvestor »

NightOwl wrote:OP, the way you are asking the question, it seems as though you think that achieving this goal would be common for members of this forum, whereas it seems to me that it would be an incredibly rare accomplishment (at least for people who got there by saving salary, not via inheritance or other major windfall).

I would consider it impressive enough for dividends to cover spending needs beyond those covered by social security and (should one be so blessed) pension -- we're talking about a roughly 2% withdrawal rate (whether achieved through dividends or total return is of small relevance). I think that very few people will get there.

NightOwl
I suppose the OP may also assume that many or most of us strive for high dividends to fund retirement. At least in my case I focus on total return, not just dividends, and am not averse to utilizing a portion of principal as well.
Have a plan, stay the course and simplify. Then ignore the noise!
User avatar
Noobvestor
Posts: 5944
Joined: Mon Aug 23, 2010 1:09 am

Re: Poll: Dividend income to match annual salary?

Post by Noobvestor »

I'm loving the results so far ... all zeros until the last one, then 19. So yeah, I've made good money, invested a lot over time, but no, dividends still aren't anywhere close to salary. It would take such a huge nest egg to generate, say, a low six-figure income in just dividends - can't imagine!
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
User avatar
ofcmetz
Posts: 2465
Joined: Tue Feb 08, 2011 7:09 pm
Location: Louisiana

Re: Poll: Dividend income to match annual salary?

Post by ofcmetz »

I would need almost 6 million. If we included the family salary then that would be much more. At 2% dividends, I don't think that most from here will get there. It's more about meeting ones annual expenses. I hope for mine to be less than half of what they are now in retirement. Also, I think total return is the proper thing to look at and not the dividend yield.
Never underestimate the power of the force of low cost index funds.
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: Poll: Dividend income to match annual salary?

Post by grabiner »

It isn't likely for most investors who will be living off their portfolios. If your portfolio has a 4% yield (which isn't common these days but might happen if bond yields return to normal), you would need a portfolio 25 times your final year's annual salary.

A common rule of thumb for retirement is that your spending needs should be 4% of your portfolio. Once you retire, your spending needs will be much less than your last year's salary, because you won't be saving for retirement or paying income tax on your high salary, and you will be receiving Social Security instead of paying into it.
Wiki David Grabiner
john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: Poll: Dividend income to match annual salary?

Post by john94549 »

For your garden-variety, two-income folks, attempting to replace income with dividends alone would be a stretch. For example, a two-income family earning $200,000/year would need $10 million at a 2% dividend.

Moving right along, it's an entirely different issue in retirement. To replace $200,000 in retirement might require less. Consider Social Security. That wipes out $45,000/yr for said couple. That gets you down to $155,000. Now you need less than $8 million at 2%. Pensions, if any, would reduce that further.

It's just math.
User avatar
mhc
Posts: 5257
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: Poll: Dividend income to match annual salary?

Post by mhc »

I'll probably never get there for two reasons:

1. I don't need to live off of just dividends when I retire.

2. I don't need my current annual salary in retirement.

If I did not retire until my dividends matched my salary, I would need 3-5 times more to retire. I ain't working that long.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
livesoft
Posts: 86076
Joined: Thu Mar 01, 2007 7:00 pm

Re: Poll: Dividend income to match annual salary?

Post by livesoft »

Not even close and will never be even close.
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
Artsdoctor
Posts: 6063
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Poll: Dividend income to match annual salary?

Post by Artsdoctor »

The only time our dividend income will surpass our salaries is when we retire or cut back to 1/4-time. If you include appreciation of principal, that was last year, and that is extremely unlikely to be repeated until retirement.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Poll: Dividend income to match annual salary?

Post by dbr »

Whoops, sorry. I voted wrong. It was between 30 and 40 years. That is the length of time between when I first got a salary and when dividends exceeded salary because I don't get a salary any more.
User avatar
CABob
Posts: 5091
Joined: Sun Feb 25, 2007 7:55 pm
Location: Southern California

Re: Poll: Dividend income to match annual salary?

Post by CABob »

It occurs to me that perhaps the question should have been, "When did your salary become less than your dividend income?"
That might have occurred at retirement, loss of job, death of primary wage earner, etc.
Bob
User avatar
plannerman
Posts: 855
Joined: Wed Feb 21, 2007 9:42 pm
Location: NC Mountains

Re: Poll: Dividend income to match annual salary?

Post by plannerman »

I have no idea what my income from dividends is.

plannerman
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: Poll: Dividend income to match annual salary?

Post by placeholder »

My 401k holdings don't even generate dividends as they are all CITs but even extrapolating those along with the other holding with a 2% or so total portfolio yield I would need a lot more investments than I have (or likely ever will) to match a 100k salary.
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Poll: Dividend income to match annual salary?

Post by jebmke »

InvestorNewb wrote:I would like to get a general idea of how long it took for your dividend income (from index funds) to match or exceed your annual salary.

For me I see this as the 'euphoria' of investing. The day that someone no longer has to worry about staying employed.
I guess bondholders have to work til they die.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
mptfan
Posts: 7217
Joined: Mon Mar 05, 2007 8:58 am

Re: Poll: Dividend income to match annual salary?

Post by mptfan »

I do not consider my annual salary as part of my analysis of when I can retire...I consider my expenses.
User avatar
Toons
Posts: 14467
Joined: Fri Nov 21, 2008 9:20 am
Location: Hills of Tennessee

Re: Poll: Dividend income to match annual salary?

Post by Toons »

Our income stream from Interest,Dividends,Capital Gains since retiring has compounded its way to providing an equal if not more than other sources(pensions,Social Security).
Timewise it involved starting to invest consistently 35 years ago and reinvesting everything in all accounts taxable and tax deferred or tax free(roth) accounts and continuing the reinvestment process for about 33 years.(Still reinvesting in non-taxed accounts).
That was the plan when I started out early on once I had grasped the concept of compounding(shares on top of shares) :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
MoonOrb
Posts: 1506
Joined: Thu Jan 24, 2013 5:58 pm

Re: Poll: Dividend income to match annual salary?

Post by MoonOrb »

I'm having trouble even imagining how someone could accomplish this without some kind of windfall, like the sale of a business or an inheiritance that gives you an enormous jumpstart on monies invested, coupled with a job that isn't necessarily high-earning (ie, sell your business and go off to work at a live-bait shop, or you have a low-wage job and a inheirit a boatload of money).
User avatar
Toons
Posts: 14467
Joined: Fri Nov 21, 2008 9:20 am
Location: Hills of Tennessee

Re: Poll: Dividend income to match annual salary?

Post by Toons »

MoonOrb wrote:I'm having trouble even imagining how someone could accomplish this without some kind of windfall, like the sale of a business or an inheiritance that gives you an enormous jumpstart on monies invested, coupled with a job that isn't necessarily high-earning (ie, sell your business and go off to work at a live-bait shop, or you have a low-wage job and a inheirit a boatload of money).
A few random thoughts :happy
Budgeting for decades and pretty much sticking to it
LBYM for decades
Contributing maximum to 401ks,Ira,Roth for decades
Downsizing instead of upsizing
Staying Focused on being debt free and eventually winding up as such.
Investing heavily in equity funds for decades and staying the course (investing more) when others are fleeing the market.
Understanding the concept of compounding and how eventually it does the "heavy lifting" of the portfolio. :happy
Stay the course and keep on keepin on. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
User avatar
midareff
Posts: 7711
Joined: Mon Nov 29, 2010 9:43 am
Location: Biscayne Bay, South Florida

Re: Poll: Dividend income to match annual salary?

Post by midareff »

Never gonna happen.
User avatar
DonCamillo
Posts: 1050
Joined: Tue Nov 26, 2013 9:27 pm
Location: Northern New Jersey

Re: Poll: Dividend income to match annual salary?

Post by DonCamillo »

I was a dividend growth investor, and I got pretty close to matching my salary, then I realized that minimum required distributions were going to hit me really hard starting next year, so I started switching from my individual high dividend stocks to the Vanguard Total Stock Market Index Fund, which is much more tax friendly, at least for my taxable account. In my Roth, I still have some high dividend stocks, and I am not in a hurry to get rid of them.

I had actually matched most of my recurring expenses to dividends from the same industry, i.e., enough electric company dividends to pay my electric bill, enough water company dividends to pay the water bill, etc.

The full match, if I had continued it, would have taken about 35 years. But I have been investing at least 40% of gross salary for over 20 years.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)
Ron
Posts: 6972
Joined: Fri Feb 23, 2007 6:46 pm
Location: Allentown–Bethlehem–Easton, PA-NJ Metropolitan Statistical Area

Re: Poll: Dividend income to match annual salary?

Post by Ron »

Being a retired couple, we don't have a "salary" to match vs. current dividends. However, we do have annual expenses to cover which is done by a combination of an SPIA, my wife's two small pensions, her spousal SS (claimed against me at FRA age) and my VA disability income, along with withdrawls from our respective retirement portfolios.

In three years when both I/wife claim our own respective SS benefits (at age 70), our then current dividends will greatly exceed the income gap of our income sources vs. our annual expenses, without any normal portfolio withdrawals beyond dividends.

Could we have ever met the OP's desired situation while working? Of course not. I would guess few people could (unless they inherited a substantial portfolio while leading a minimalist lifestyle).

- Ron
robertf57
Posts: 25
Joined: Thu Jun 19, 2014 2:01 pm

Re: Poll: Dividend income to match annual salary?

Post by robertf57 »

Really? This is a poll question?

Accumulating a portfolio where dividend distributions exceed salary tells me you either
1) Have little or no salary (Already retired?)
2) Had an enormous windfall
3) Have worked WAY beyond when you needed to!

The question really doesn't make sense. If you compared EXPENSES to dividend income, it might have been a little interesting, but the proper question in my mind is expenses and total return.
Last edited by robertf57 on Wed Dec 10, 2014 8:39 pm, edited 1 time in total.
User avatar
Aptenodytes
Posts: 3786
Joined: Tue Feb 08, 2011 7:39 pm

Re: Poll: Dividend income to match annual salary?

Post by Aptenodytes »

I have no clue what my dividend income is. I track a lot of stuff but not that.
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Poll: Dividend income to match annual salary?

Post by stan1 »

I don't think it will ever happen, even if I live 30 years into retirement.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
Ron
Posts: 6972
Joined: Fri Feb 23, 2007 6:46 pm
Location: Allentown–Bethlehem–Easton, PA-NJ Metropolitan Statistical Area

Re: Poll: Dividend income to match annual salary?

Post by Ron »

Aptenodytes wrote:I have no clue what my dividend income is. I track a lot of stuff but not that.
If you want to get a rough snapshot, you can use https://secure.sigfig.com/auth/#/signup which will give you your total dividends over the last four quarters.

- Ron
TradingPlaces
Posts: 1245
Joined: Sun Nov 09, 2014 12:19 pm
Location: 30.286029, -97.530011

Re: Poll: Dividend income to match annual salary?

Post by TradingPlaces »

Somewhat ill-formed question, and here is why.
Last edited by TradingPlaces on Sat Jan 24, 2015 12:34 am, edited 1 time in total.
User avatar
Sbashore
Posts: 952
Joined: Wed Feb 20, 2008 9:38 pm
Location: USA

Re: Poll: Dividend income to match annual salary?

Post by Sbashore »

It never happened when I was working. It has not happened in my retirement. It will not happen in my retirement.

Now total return, that's another question.
Steve | Semper Fi
MoonOrb
Posts: 1506
Joined: Thu Jan 24, 2013 5:58 pm

Re: Poll: Dividend income to match annual salary?

Post by MoonOrb »

Toons wrote:
MoonOrb wrote:I'm having trouble even imagining how someone could accomplish this without some kind of windfall, like the sale of a business or an inheiritance that gives you an enormous jumpstart on monies invested, coupled with a job that isn't necessarily high-earning (ie, sell your business and go off to work at a live-bait shop, or you have a low-wage job and a inheirit a boatload of money).
A few random thoughts :happy
Budgeting for decades and pretty much sticking to it
LBYM for decades
Contributing maximum to 401ks,Ira,Roth for decades
Downsizing instead of upsizing
Staying Focused on being debt free and eventually winding up as such.
Investing heavily in equity funds for decades and staying the course (investing more) when others are fleeing the market.
Understanding the concept of compounding and how eventually it does the "heavy lifting" of the portfolio. :happy
Stay the course and keep on keepin on. :happy
I hear you, but if this were true, surely the poll results would show something different than 97% "hasn't happened yet?" Because what you're describing is basically the BH formula, and even people who relentlessly follow the BH formula (for lack of a better description) as you laid out up there, are going to be extremely hard-pressed to do this.

The reason I think this is not because I think it's Mission: Impossible to build a large portfolio, but because as most investors see their portfolios grow, they will also see their earning potential grow. So my point is that the circumstances under which this could happen would be substantially unusual, not merely a rigorous adherence to LBYM + stay the course, which is basically what it looks like you're describing.
freebeer
Posts: 2014
Joined: Wed May 02, 2007 8:30 am
Location: Seattle area USA

Re: Poll: Dividend income to match annual salary?

Post by freebeer »

Ged wrote:Dividends are a side show. What counts is real return.
+1 to that.

And focusing on dividends is also a recipe for tax-inefficiency, with both double taxation (at corporate and individual levels) and the missed opportunity to postpone paying capital gains esp. given broad-based index funds like Total Stock Market.

I'm a very long way from my investment portfolio generating dividends equal to my salary. But average total return, we're there (I won't be after the divorce is finalized, sigh, but that's another story...)
leonard
Posts: 5993
Joined: Wed Feb 21, 2007 10:56 am

Re: Poll: Dividend income to match annual salary?

Post by leonard »

Total returns count. Dividends are only one element of that.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
User avatar
Candor
Posts: 1287
Joined: Sat May 28, 2011 4:25 pm

Re: Poll: Dividend income to match annual salary?

Post by Candor »

I was about to pack it in when I opened this tread and finally admit I wasn't worthy. Glad to see I still fit in, I think... :D
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
User avatar
DonCamillo
Posts: 1050
Joined: Tue Nov 26, 2013 9:27 pm
Location: Northern New Jersey

Re: Poll: Dividend income to match annual salary?

Post by DonCamillo »

MoonOrb wrote: I hear you, but if this were true, surely the poll results would show something different than 97% "hasn't happened yet?" Because what you're describing is basically the BH formula, and even people who relentlessly follow the BH formula (for lack of a better description) as you laid out up there, are going to be extremely hard-pressed to do this.

The reason I think this is not because I think it's Mission: Impossible to build a large portfolio, but because as most investors see their portfolios grow, they will also see their earning potential grow. So my point is that the circumstances under which this could happen would be substantially unusual, not merely a rigorous adherence to LBYM + stay the course, which is basically what it looks like you're describing.
There are a bunch of good stocks out there paying over 5%, such as BHP Billiton, that also have a history of raising dividends. A portfolio of these would only require about 20 times salary saved to match salary with dividends. I suspect that a lot of older BH have more than 20 times salary saved.

I think the reason you have so few people who have taken that approach in this survey is that it is contrary to BH philosophy. If the question had been asked on a forum dedicated to dividend growth investing, a lot more would have reached that milestone.

Dividends are nice, although non-qualified dividends are taxed as ordinary income. Even dividends getting the same tax rate as long term capital gains are less desirable, for three reasons;
1) You can not choose when to get the income. You have to pay taxes in the year the dividend is paid.
2) With dividends, you pay taxes on the whole amount. When you withdraw capital gains, you don't pay taxes on your original cost.
3) With capital gains, you can choose the asset with the least capital gains when you withdraw money to minimize taxes.

People who have more than twenty times their salary saved are likely to have a significant part of that in deferred income like 401k, 457b, 403b and TIRA that will subject them to RMDs after the age of 70 1/2. Tax friendly index funds and municipal bonds in your taxable accounts minimize your other income when that RMD ordinary income pushes you into higher tax brackets.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)
kaudrey
Posts: 1143
Joined: Fri Nov 22, 2013 1:40 pm

Re: Poll: Dividend income to match annual salary?

Post by kaudrey »

I will not need to be employed long before that happens. If that is your 'euphoria' moment, you'll hit the ability to retire long before dividend income matches salary. That is not even close to an appropriate benchmark.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Poll: Dividend income to match annual salary?

Post by dbr »

DonCamillo wrote: There are a bunch of good stocks out there paying over 5%, such as BHP Billiton, that also have a history of raising dividends. A portfolio of these would only require about 20 times salary saved to match salary with dividends. I suspect that a lot of older BH have more than 20 times salary saved.
By the time I retired my salary had multiplied more than twenty times since the first salary I received in my first job. My assets would have multiplied by more than that. So which salary and assets are we comparing? At no time would a 5% dividend income have exceeded the salary I was earning at any specific time, including my final salary.

But I think the OP, who has disappeared, really wants to know is how long it has taken people to accumulate enough money to support their income needs in retirement by spending investment dividends alone. Even that question may not be meaningful because most people would have sources of income other than investments, starting at least with Social Security. So a better question would be when did people accumulate enough assets that dividends alone would would be a sufficient rate of withdrawal combined with other sources of income to meet what the retiree would consider an acceptable level of spending. But even that question does not mean anything in light of the comment immediately above that the income available from dividends is arbitrary because one can arrange one's investments to withdraw using dividends at just about any rate one pleases.

Anyway you can run a stock screener today and find at least 200 stocks that are presently paying a dividend exceeding 10%, so apparently there is no problem.
Post Reply