Anyone successfully living off dividends & interest?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
Riprap
Posts: 507
Joined: Thu Jan 29, 2009 2:08 pm

Re: Anyone successfully living off dividends & interest?

Post by Riprap »

000 wrote: Sat Sep 12, 2020 8:55 pmDoes that help?
No.
User avatar
22twain
Posts: 2548
Joined: Thu May 10, 2012 5:42 pm

Re: Anyone successfully living off dividends & interest?

Post by 22twain »

Keenobserver wrote: Sat Sep 12, 2020 7:39 pm Not sure merely $ 1 million liquid would qualify for HNW. I am almost there and not for a second have I felt someone who is anywhere near HNW.
$1 million would put you in the 91st percentile of all US households (as of 2016), according to this calculator. There's a link where you can look it up per age group.

Google "high net worth" and you'll find a number of sites (Investopedia, Wikipedia, Smartasset, etc.) that list thresholds of $1M, $5M and $30M for HNW, VHNW and UHNW respectively.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
softwaregeek
Posts: 559
Joined: Wed May 08, 2019 8:59 pm

Re: Anyone successfully living off dividends & interest?

Post by softwaregeek »

Keenobserver wrote: Sat Sep 12, 2020 7:39 pm Not sure merely $ 1 million liquid would qualify for HNW. I am almost there and not for a second have I felt someone who is anywhere near HNW. I would say $ 3.5 to $ 4 Million I would consider myself member of HNW category.
It is always more. Nobody considers themselves HNW, one guy I know has 15m and says wealth starts at 25.
schachtw
Posts: 174
Joined: Mon Jul 06, 2015 6:15 pm

Re: Anyone successfully living off dividends & interest?

Post by schachtw »

Retired couple, 69. Not taking RMDs yet.

Living on SS + taxable dividends and interest. Approximately 8K/month.
raiderjkwong
Posts: 44
Joined: Tue Aug 25, 2020 11:27 am

Re: Anyone successfully living off dividends & interest?

Post by raiderjkwong »

Old investment adages that applies to retirement portfolios:

Take risk to get rich; limit risk to stay rich

Invest in stocks to growth wealth; Invest in bonds to preserve wealth
User avatar
Artful Dodger
Posts: 1044
Joined: Thu Oct 20, 2016 12:56 pm

Re: Anyone successfully living off dividends & interest?

Post by Artful Dodger »

Per Wikipedia...

High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible wealth (assets such as stocks and bonds) exceed a given amount. Typically, these individuals are defined as holding financial assets (excluding their primary residence) with a value greater than US$1 million.

"Very-HNWI" (VHNWI) can refer to someone with a net worth of at least US$5 million.

The Capgemini and Merrill Lynch World Wealth Report 2006 defines an additional class of ultra-high-net-worth individuals (UHNWIs), those with US$30 million in liquid financial assets or with a disposable income of more than US$20 million.

At the end of 2018, there were estimated to be just over 14 million HNWIs in the world. The United States had the highest number of HNWIs (4,900,000) of any country, while New York City had the most HNWIs (377,000) among cities.
User avatar
willthrill81
Posts: 20812
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

Riprap wrote: Sat Sep 12, 2020 9:14 pm
000 wrote: Sat Sep 12, 2020 8:55 pmDoes that help?
No.
I believe that 000's point is that imposing the restriction of ignoring capital appreciation is both unnecessary and deleterious to investors.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
MathIsMyWayr
Posts: 2256
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Anyone successfully living off dividends & interest?

Post by MathIsMyWayr »

22twain wrote: Sat Sep 12, 2020 9:19 pm
Keenobserver wrote: Sat Sep 12, 2020 7:39 pm Not sure merely $ 1 million liquid would qualify for HNW. I am almost there and not for a second have I felt someone who is anywhere near HNW.
$1 million would put you in the 91st percentile of all US households (as of 2016), according to this calculator. There's a link where you can look it up per age group.

Google "high net worth" and you'll find a number of sites (Investopedia, Wikipedia, Smartasset, etc.) that list thresholds of $1M, $5M and $30M for HNW, VHNW and UHNW respectively.
Vanguard Wealth Management: $5MM
Fidelity Private Wealth Management: $10M
rossington
Posts: 769
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Anyone successfully living off dividends & interest?

Post by rossington »

unbiased wrote: Sat Sep 12, 2020 2:30 pm
I think you want me to clarify what I mean by "income only?" Basically, a portfolio that puts capital preservation first and foremost -- and throws off enough income/dividends/interest to fund retirement expenditures and keep up with inflation. This would be different from a "total return" approach that relies on capital appreciation, rebalancing, and/or selling of shares to fund expenses. I really don't think this can be achieved with a bond-only approach, unless in volatile CEFs. But I'm open to any approach and that's why I'm asking the experience of those who seem to be making it work.
Do not separate total return from dividends and interest only income. It is a psychological mindset that one is more advantageous over the other...but this is not true. They are one and the same.
What determines the return (no matter how you account for it mentally) is the size of your portfolio and what you have invested in gives you your desired rate of return for your expected needs. It is obvious that the larger the portfolio the greater income it provides as opposed to a smaller portfolio of the same investments.
Unless you don't have a clue as to what investments might provide your desired income then you need to do more research as to what is most suitable for you to invest in.
Add any additional income such as S.S.,etc. to your portfolio income stream...will you be comfortable with the total as you estimate it?
What is your investment, income, timeline now?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Keenobserver
Posts: 448
Joined: Thu Aug 13, 2015 1:05 pm

Re: Anyone successfully living off dividends & interest?

Post by Keenobserver »

softwaregeek wrote: Sat Sep 12, 2020 9:31 pm
Keenobserver wrote: Sat Sep 12, 2020 7:39 pm Not sure merely $ 1 million liquid would qualify for HNW. I am almost there and not for a second have I felt someone who is anywhere near HNW. I would say $ 3.5 to $ 4 Million I would consider myself member of HNW category.
It is always more. Nobody considers themselves HNW, one guy I know has 15m and says wealth starts at 25.
I suppose you are right. We are a greedy species. I try to be greatful to God as much as I can, and realize we are quibbling 1st world problems. Im blessed and fortunate. I intend to be more charitable than I have been. I can safely assume there are more serious problems people out there have than not feeling HNW.
Forestervt2
Posts: 4
Joined: Sun Jul 31, 2016 12:07 pm

Re: Anyone successfully living off dividends & interest?

Post by Forestervt2 »

For the last several years we have basically set our family spending budget based on dividend, interest and investment income from non retirement assets. We are in our mid 30s with kids and have a net worth below 2 million. It is certainly possible, however we are frugal only spend about 35k per year. We do have rental property contribute to our income. In addition, we also actively pursue bank and credit card bonus aggressively. This takes some work, and probably could not be scaled up greatly.
It is a nice feeling to live off of dividends, interest and rental income. However I would agree with others who have posted, eating into principal not really a bad thing and can be done in careful way. We basically keep to the 3 fund portfolio focused more on growth than producing dividends. I do think there is a real risk of focusing to much on dividends and missing out on market gains.
tbone555
Posts: 178
Joined: Thu Apr 13, 2017 1:28 pm

Re: Anyone successfully living off dividends & interest?

Post by tbone555 »

Forestervt2 wrote: Sun Sep 13, 2020 7:13 am For the last several years we have basically set our family spending budget based on dividend, interest and investment income from non retirement assets. We are in our mid 30s with kids and have a net worth below 2 million. It is certainly possible, however we are frugal only spend about 35k per year. We do have rental property contribute to our income. In addition, we also actively pursue bank and credit card bonus aggressively. This takes some work, and probably could not be scaled up greatly.
It is a nice feeling to live off of dividends, interest and rental income. However I would agree with others who have posted, eating into principal not really a bad thing and can be done in careful way. We basically keep to the 3 fund portfolio focused more on growth than producing dividends. I do think there is a real risk of focusing to much on dividends and missing out on market gains.

Spending dividends is eating into principal.
NotWhoYouThink
Posts: 3171
Joined: Fri Dec 26, 2014 4:19 pm

Re: Anyone successfully living off dividends & interest?

Post by NotWhoYouThink »

A family friend managed to live off interest for a while. He had followed his long-time trusted financial advisor from UBS to Stanford Investments, and put his money into high interest CDs. It ended poorly.

Save more, spend less is the best way to live off interest. Taking more risk can work or can backfire.

Understand total return investing is the best way to live well from your investments.
Admiral
Posts: 3013
Joined: Mon Oct 27, 2014 12:35 pm

Re: Anyone successfully living off dividends & interest?

Post by Admiral »

I suppose I would be considered HNW. We will not have an 8 figure portfolio.

Upon reaching FRA (though we plan to retire well before that) our income will look like this:

$40k pension
$60-80k Social security (dual, current dollars, amount depends on when we file)
Portfolio income ONLY (30-40k). Currently port income is around $20k.
TOTAL, low end: $130k pre tax. That is currently less than half our current pre-tax income.

So: yes, it is entirely achievable. Even without the pension we could live on that easily. Our home will be paid off. Our base expenses would be perhaps $4k per month (r.e. tax, utils, groceries, entertainment, very limited travel)

However, I don't foresee a need to do that, as even with a low withdrawal rate of 3% the portfolio will continue to grow.

It just depends on how much you need to live. Currently I am budgeting $10k a month, so a lot of discretionary expenses.
Scooter57
Posts: 1468
Joined: Thu Jan 24, 2013 9:20 am

Re: Anyone successfully living off dividends & interest?

Post by Scooter57 »

You will find a community of dividend-focused investors on Seeking Alpha's web site whose perspective offers a good counterbalance to the Bogleheads. Until this year I was earning a satisfying income from CDs paying 2.5-3.5% which made dividend paying stocks, with their risk of price decrease less attractive.

The current rate fiasco has made it much more challenging to preserve capital and live on dividends and interest. Quality dividend paying stocks have been bid up to very high prices which make it more likely they will decline in the future and which lower the dividend yield to yields that poorly compensate for risk.

There is no easy answer. You will have to educate yourself about stocks to sort through the options. An index investing approach won't work well as the dividend stock indexes don't pay much interest at all because of the way their holdings have been bid up and they tend to reach for yield by owing, IMHO, way too much banking and insurance company stock.

In more normal times plenty of us do live on dividends and interest, social security, and maybe a small side business. I see a lot more side businesses among my 70-year old fiends than I saw in my parents' generation at that age.
pkcrafter
Posts: 14321
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Anyone successfully living off dividends & interest?

Post by pkcrafter »

unbiased wrote: Fri Sep 11, 2020 9:25 pm I'm a few years out from retirement and am exploring a bunch of different portfolio strategies. I won't have enough money to just dump it in a bond fund (unless it's some volatile CEF) and "live off the interest" like our grandparents did. I've run the numbers every which way and in this low-interest rate environment it just won't work. I mean, it could work for maybe a few years or even a decade, but after 20 years inflation will likely require me a regular diet of cat food.

But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
unbiased, your post has generate a lot of discussion.
I won't have enough money to just dump it in a bond fund (unless it's some volatile CEF) and "live off the interest" like our grandparents did.
Our grandparents used bonds and individual stocks that produced a good dividend yield. In those days, that was enough to generate income and maintain the value of the portfolio. We don't have that option any more. The first thing you need to understand is dividends and interest are parts of a portfolio's total return.

https://ritholtz.com/2019/11/total-return-versus-price/

You are not going to find interest from bonds to cover your costs and inflation.
...the Average annual inflation rate is 3.22%. That doesn't sound too bad until we realize that at that rate prices will double every 20 years.
https://www.google.com/search?client=fi ... 88&bih=499

This means you have to earn enough to pay the bills plus another 3.22%/year to cover the rise in those bills over time. This also means you need growth in your portfolio just to maintain your status quo. We have seen data that shows you can safely withdraw 4% from your portfolio, but to maintain that you must have some growth. To get enough growth to sustain withdraws with inflation, you need a minimum of about 35-40% equity. Now, if you have enough money to cover spending needs with just a 2% withdrawal, you do have flexibility.

Just remember, taking dividends is a withdraw of total return and no different that reinvesting the dividends and then taking a withdraw, although the latter is better because it gives you options on when and from where to make withdrawals.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
scrabbler1
Posts: 2522
Joined: Fri Nov 20, 2009 2:39 pm

Re: Anyone successfully living off dividends & interest?

Post by scrabbler1 »

unbiased wrote: Sat Sep 12, 2020 7:41 pm
scrabbler1 wrote: Sat Sep 12, 2020 4:54 pm
I have been living off mostly bond fund dividends since I retired at 45, 12 years ago. My portfolio was under $1M back then (late 2008) but has risen to around $1.6M today. About 2/3 of it is in a non-retirement account, the portion which generates all the dividend income used to cover my bills. I have some money in a stock fund which generates some dividends (less today because I recently switched it to an index fund so I can resume getting the ACA premium subsidy).

My own inflation rate is very low. Only the volatile health insurance costs have been worrisome at times.

In a few years, I will be able to tap into my IRA. A few years after that, my frozen company pension and Social Security. Medicare will eventually replace the ACA. So, my overall financial picture will only improve.
Hey that was a bold move to retire with under a $1 million at age 45! Great job! What's your total AA? Is it like a 30/70? What kind of bonds? Just a total bond index like Vanguard Total Bond Market, or do you buy individual bonds? What's your portfolio yield, and has it been drifting down over the years along with interest rates?

Sorry for all the questions, but appreciate your insight.
Your questions and my answers:

Hey that was a bold move to retire with under a $1 million at age 45! Great job!

Thank you.

What's your total AA?

Is it like a 30/70?

It has varied over the years, but it is 36/64 overall, and 32/68 in the taxable part.

What kind of bonds?

Most in the taxable account are in a borderline junk bond fund which invests mainly in long-term, corporate bonds rated B, BB, and BBB. I have some smaller holdings in muni bond funds. I also have an investment-grade corporate bond fund in the IRA.

Just a total bond index like Vanguard Total Bond Market, or do you buy individual bonds?

It's a Fidelity bond fund, FHIFX.

What's your portfolio yield, and has it been drifting down over the years along with interest rates?

The main bond fund's yield has been drifting downward since 2008. I have been able to add shares to offset the declining mil rate.
Small Savanna
Posts: 274
Joined: Sat Feb 09, 2019 2:27 am

Re: Anyone successfully living off dividends & interest?

Post by Small Savanna »

I wouldn't necessarily advocate this, but there are plenty of stocks with 4% or higher yield, and many of them are companies with decent balance sheets and stable business prospects. But there isn't any evidence that these companies are better investments than lower-yielding profitable companies that choose to keep their dividends low. If you accept what I said so far, then what's so bad about selling stock as part of your retirement income strategy?
TheNightsToCome
Posts: 606
Joined: Fri Jun 30, 2017 11:48 pm

Re: Anyone successfully living off dividends & interest?

Post by TheNightsToCome »

MathIsMyWayr wrote: Sat Sep 12, 2020 2:39 pm
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
I usually associate HNW with successful high earners such as medical doctors. HNW means from around $10MM.
Very few doctors meet this criterion. (I'm a doctor.)
User avatar
patrick013
Posts: 3010
Joined: Mon Jul 13, 2015 7:49 pm

Re: Anyone successfully living off dividends & interest?

Post by patrick013 »

Small Savanna wrote: Sun Sep 13, 2020 10:55 am I wouldn't necessarily advocate this, but there are plenty of stocks with 4% or higher yield, and many of them are companies with decent balance sheets and stable business prospects. But there isn't any evidence that these companies are better investments than lower-yielding profitable companies that choose to keep their dividends low. If you accept what I said so far, then what's so bad about selling stock as part of your retirement income strategy?
Nothing, but diversification is investor's preference. Risky growth stocks can
exist beside less risky or less volatile dividend stocks giving up some low yield
bond AA to make room for them. That's the idea.

Many stocks and dividend indexes are paying 5,6, even 7% yields at today's
prices. Dogs of the Dow Top 10 Dividend Achievers for example but does include
some MLP's and my research is a little sparse about MLP's.

Some have market share wrapped up and some don't it seems.
age in bonds, buy-and-hold, 10 year business cycle
jebmke
Posts: 11382
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Anyone successfully living off dividends & interest?

Post by jebmke »

tbone555 wrote: Sun Sep 13, 2020 7:20 am Spending dividends is eating into principal.
Yes. It is also a micro re-balance.
When you discover that you are riding a dead horse, the best strategy is to dismount.
toocold
Posts: 156
Joined: Sun Jul 23, 2017 9:17 am

Re: Anyone successfully living off dividends & interest?

Post by toocold »

To live off of only dividends and interest, with my budget of $72k, portfolio of 60/40, 2% dividend yield and 1% interest rate, I'd need approximately $5M without accounting for taxes. So you'd need to find somebody who lives on less than $72k, invests in higher dividend yield stocks, has alternative passive/semi-passive income like SS, pensions, real estate, increases their AA closer to 100/0, or has side hustles. Otherwise, you can open the parameter to include capital gains or having more money.
Admiral
Posts: 3013
Joined: Mon Oct 27, 2014 12:35 pm

Re: Anyone successfully living off dividends & interest?

Post by Admiral »

toocold wrote: Sun Sep 13, 2020 11:48 am To live off of only dividends and interest, with my budget of $72k, portfolio of 60/40, 2% dividend yield and 1% interest rate, I'd need approximately $5M without accounting for taxes. So you'd need to find somebody who lives on less than $72k, invests in higher dividend yield stocks, has alternative passive/semi-passive income like SS, pensions, real estate, increases their AA closer to 100/0, or has side hustles. Otherwise, you can open the parameter to include capital gains or having more money.
Dunno. Doesn't seem that difficult. Consider that a couple that earned well but not crazy well and amasses a $1m portfolio and two $25k/year SS payments (which is far from max SS, so let's say they each earned less than $100k per year on average).

Withdrawing 3% as income only, that gives them $80k pre-tax. Assuming paid off house, they are not flying first class but you can live fine on that in most places in this country (again, assuming paid off house).

Once you're at 2% (bond income + dividends) it gets a little dicier but possible.
toocold
Posts: 156
Joined: Sun Jul 23, 2017 9:17 am

Re: Anyone successfully living off dividends & interest?

Post by toocold »

Admiral wrote: Sun Sep 13, 2020 12:16 pm [Dunno. Doesn't seem that difficult. Consider that a couple that earned well but not crazy well and amasses a $1m portfolio and two $25k/year SS payments (which is far from max SS, so let's say they each earned less than $100k per year on average).

Withdrawing 3% as income only, that gives them $80k pre-tax. Assuming paid off house, they are not flying first class but you can live fine on that in most places in this country (again, assuming paid off house).

Once you're at 2% (bond income + dividends) it gets a little dicier but possible.
That's why I said if you are only looking at portfolio itself. If you have additional passive income, such as a pension or ss, you could do this. Heck, if you have a pension that pays $100k a year, you could be destitute with 0 net worth, and you'll still be fine. That's how the majority of the people retired with defined benefits.
bluelight
Posts: 344
Joined: Sun Jul 10, 2011 12:08 am

Re: Anyone successfully living off dividends & interest?

Post by bluelight »

Retired couple living in a HCOL area. House and vehicles are long ago paid off. We live on DH's SS and small pensions as well as tax exempt and taxable dividends. We live fairly frugally and have only needed to tap into savings for vacations. With no travel this year I expect that we won't need to touch our savings or investments to make up the difference between expenses and income.
MathIsMyWayr
Posts: 2256
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Anyone successfully living off dividends & interest?

Post by MathIsMyWayr »

TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am
MathIsMyWayr wrote: Sat Sep 12, 2020 2:39 pm
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
I usually associate HNW with successful high earners such as medical doctors. HNW means from around $10MM.
Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
User avatar
willthrill81
Posts: 20812
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am
MathIsMyWayr wrote: Sat Sep 12, 2020 2:39 pm
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
I usually associate HNW with successful high earners such as medical doctors. HNW means from around $10MM.
Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
bampf
Posts: 589
Joined: Thu Aug 04, 2016 6:19 pm

Re: Anyone successfully living off dividends & interest?

Post by bampf »

StoopieHippo wrote: Sat Sep 12, 2020 2:59 pm https://www.mrtakoescapes.com/

~$3mil portfolio for him and his family of 4 live off of dividends entirely.
I read this and it sounds cool. Except, you know, I don't see how it works. Supposedly the car insurance was zero for the month of August. No mention of health insurance for a family of four. $400 for food. Internet at $45. No clothing budget. No school supplies. And you know, he makes an income off his website I think. I am always mystified when folks talk about making it on ~$40K a year with mortgage being $28K.

In fairness I didn't read through more than a few minutes of posts. I like the frugality and I like the practicality. I don't see how you can avoid paying anything to repair the house, save for children's education, repair the car, dentistry and so forth. But, they have a plan and I guess that matters.
Normchad
Posts: 1275
Joined: Thu Mar 03, 2011 7:20 am

Re: Anyone successfully living off dividends & interest?

Post by Normchad »

willthrill81 wrote: Sun Sep 13, 2020 2:17 pm
MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am
MathIsMyWayr wrote: Sat Sep 12, 2020 2:39 pm
Riprap wrote: Sat Sep 12, 2020 8:09 am

What is the threshold for crossing into the HNW category these days?
I usually associate HNW with successful high earners such as medical doctors. HNW means from around $10MM.
Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
They also start earning good money around 30-32. So have fewer years for compounding....

I’d be interested to know what proportion of engineers get to $5M. I won’t, and I make very good money. I just won’t bother working long enough to get there. I seriously doubt that many can get to $5M.
User avatar
willthrill81
Posts: 20812
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

Normchad wrote: Sun Sep 13, 2020 2:37 pm
willthrill81 wrote: Sun Sep 13, 2020 2:17 pm
MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am
MathIsMyWayr wrote: Sat Sep 12, 2020 2:39 pm
I usually associate HNW with successful high earners such as medical doctors. HNW means from around $10MM.
Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
They also start earning good money around 30-32. So have fewer years for compounding....

I’d be interested to know what proportion of engineers get to $5M. I won’t, and I make very good money. I just won’t bother working long enough to get there. I seriously doubt that many can get to $5M.
Even with a six figure income and a 50% saving rate, I would probably have to work until age 60 to reach $5 million in today's dollars. (I need less than half that to retire comfortably, so I currently have no intention of working that long though.) So it doesn't seem likely to me that more than a tiny percentage of engineers will reach $5 million.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
Normchad
Posts: 1275
Joined: Thu Mar 03, 2011 7:20 am

Re: Anyone successfully living off dividends & interest?

Post by Normchad »

willthrill81 wrote: Sun Sep 13, 2020 2:40 pm
Normchad wrote: Sun Sep 13, 2020 2:37 pm
willthrill81 wrote: Sun Sep 13, 2020 2:17 pm
MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am

Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
They also start earning good money around 30-32. So have fewer years for compounding....

I’d be interested to know what proportion of engineers get to $5M. I won’t, and I make very good money. I just won’t bother working long enough to get there. I seriously doubt that many can get to $5M.
Even with a six figure income and a 50% saving rate, I would probably have to work until age 60 to reach $5 million in today's dollars. (I need less than half that to retire comfortably, so I currently have no intention of working that long though.) So it doesn't seem likely to me that more than a tiny percentage of engineers will reach $5 million.
I agree Will! A lot of us hear stories of a few devs getting rich from options at FAANG type companies, and it falsely creates the impression that *all engineers * in *all disciplines* are getting very rich. Some in SW are, but I’m sure it’s very different for chemical, mechanical, aeronautical, and industrial engineers. And I’m pretty certain the majority of SW engineers aren’t getting anywhere close to $5M either. Although some certainly are.....
lws
Posts: 166
Joined: Tue Apr 25, 2017 6:12 pm

Re: Anyone successfully living off dividends & interest?

Post by lws »

I am not living off dividends and interest.
I live off a pension exclusively.
Income from Social Security and from invested capital is used for giving.
Escapevelocity
Posts: 185
Joined: Mon Feb 18, 2019 8:32 am

Re: Anyone successfully living off dividends & interest?

Post by Escapevelocity »

I sincerely hope that the folks living solely off dividends and bond coupon payments enjoyed whatever number of years that they worked in their careers. Because if they didn’t love their work, they wasted a lot of time over-saving for retirement.
BogleFan510
Posts: 107
Joined: Tue Aug 04, 2020 2:13 pm

Re: Anyone successfully living off dividends & interest?

Post by BogleFan510 »

removed outdated comment
Last edited by BogleFan510 on Mon Sep 14, 2020 9:52 pm, edited 2 times in total.
MathIsMyWayr
Posts: 2256
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Anyone successfully living off dividends & interest?

Post by MathIsMyWayr »

willthrill81 wrote: Sun Sep 13, 2020 2:40 pm
Normchad wrote: Sun Sep 13, 2020 2:37 pm
willthrill81 wrote: Sun Sep 13, 2020 2:17 pm
MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
TheNightsToCome wrote: Sun Sep 13, 2020 11:15 am

Very few doctors meet this criterion. (I'm a doctor.)
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
They also start earning good money around 30-32. So have fewer years for compounding....

I’d be interested to know what proportion of engineers get to $5M. I won’t, and I make very good money. I just won’t bother working long enough to get there. I seriously doubt that many can get to $5M.
Even with a six figure income and a 50% saving rate, I would probably have to work until age 60 to reach $5 million in today's dollars. (I need less than half that to retire comfortably, so I currently have no intention of working that long though.) So it doesn't seem likely to me that more than a tiny percentage of engineers will reach $5 million.
I did not pull the stretch goal of $5 million out of thin air. Let's take an engineer with a graduate degree from a decent school in a typical discipline, not SW*. If he starts working after getting a Ph.D. in his late 20s until 65, and contributes 401k to the maximum and employer matching, $27k and $35k before and after 50, respectively, his 401k balance will be around $3.5 millions by age 65 assuming an annual return of 6%. He may also save more as recent postings show. He has to maintain a reasonably frugal life style which is not difficult for a typical engineer. Yes, it is a stretch goal and don't try to bail out early.

*I excluded SW because SW engineers' earnings may be higher than in other disciplines, but their skills become obsolete in short time.
User avatar
Leif
Posts: 3030
Joined: Wed Sep 19, 2007 4:15 pm

Re: Anyone successfully living off dividends & interest?

Post by Leif »

Now I'm living off of CDs as they mature. They are mostly around 3%. But not anymore. And it appears not for at least the next few years. So, we will see. To live off of dividends and interest you will need a lot of money invested and a low requirement for money from your portfolio. If I did not have CDs maturing I'm sure I would be selling some bonds & stocks, since some are near all time highs right now. I have no problem in selling stocks. If prices drop again I can rebalance back into equities.
User avatar
CyclingDuo
Posts: 3656
Joined: Fri Jan 06, 2017 9:07 am

Re: Anyone successfully living off dividends & interest?

Post by CyclingDuo »

Scooter57 wrote: Sun Sep 13, 2020 10:17 amQuality dividend paying stocks have been bid up to very high prices which make it more likely they will decline in the future and which lower the dividend yield to yields that poorly compensate for risk.
You have that backwards, Scooter57. If the share price declines, but the dividend payout stays intact, the yield increases - not decreases, making it an excellent compensation for consideration at the time of taking the risk with a purchase of shares. I like buying dividend stocks when they go on sale like that. 8-)

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
MathIsMyWayr
Posts: 2256
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Anyone successfully living off dividends & interest?

Post by MathIsMyWayr »

CyclingDuo wrote: Sun Sep 13, 2020 4:06 pm
Scooter57 wrote: Sun Sep 13, 2020 10:17 amQuality dividend paying stocks have been bid up to very high prices which make it more likely they will decline in the future and which lower the dividend yield to yields that poorly compensate for risk.
You have that backwards, Scooter57. If the share price declines, but the dividend payout stays intact, the yield increases - not decreases, making it an excellent compensation for consideration at the time of taking the risk with a purchase of shares. I like buying dividend stocks when they go on sale like that. 8-)

CyclingDuo
Some stores jack up the prices of items some time before putting them "on sale." Are they a good buy?
Wrench
Posts: 129
Joined: Sun Apr 28, 2019 10:21 am

Re: Anyone successfully living off dividends & interest?

Post by Wrench »

MathIsMyWayr wrote: Sun Sep 13, 2020 3:24 pm
willthrill81 wrote: Sun Sep 13, 2020 2:40 pm
Normchad wrote: Sun Sep 13, 2020 2:37 pm
willthrill81 wrote: Sun Sep 13, 2020 2:17 pm
MathIsMyWayr wrote: Sun Sep 13, 2020 2:13 pm
Engineers' (stretch) goal is $5MM and $10MM for doctors. There are two things in favor of medical doctors, higher earnings and (far) more secure employment prospect. Another factor: experience, aka age, also counts favorably for doctors.
The two big hurdles for physicians are huge student loans and the potentially strong motivation to live the very expensive 'doctor's lifestyle'. Many won't reach a zero net worth until they're in their mid 30s, some even later.
They also start earning good money around 30-32. So have fewer years for compounding....

I’d be interested to know what proportion of engineers get to $5M. I won’t, and I make very good money. I just won’t bother working long enough to get there. I seriously doubt that many can get to $5M.
Even with a six figure income and a 50% saving rate, I would probably have to work until age 60 to reach $5 million in today's dollars. (I need less than half that to retire comfortably, so I currently have no intention of working that long though.) So it doesn't seem likely to me that more than a tiny percentage of engineers will reach $5 million.
I did not pull the stretch goal of $5 million out of thin air. Let's take an engineer with a graduate degree from a decent school in a typical discipline, not SW*. If he starts working after getting a Ph.D. in his late 20s until 65, and contributes 401k to the maximum and employer matching, $27k and $35k before and after 50, respectively, his 401k balance will be around $3.5 millions by age 65 assuming an annual return of 6%. He may also save more as recent postings show. He has to maintain a reasonably frugal life style which is not difficult for a typical engineer. Yes, it is a stretch goal and don't try to bail out early.

*I excluded SW because SW engineers' earnings may be higher than in other disciplines, but their skills become obsolete in short time.
Now take away ~$1M per child
https://business.time.com/2009/09/18/1- ... h-college/
through ~age 22 (and maybe beyond) for two or three children and your $5M turns into $2M-$3M. That's about where I am at age 66. But I wouldn't change a thing - my three kids are the best investment I ever made, bar none! :happy
User avatar
abuss368
Posts: 21491
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Anyone successfully living off dividends & interest?

Post by abuss368 »

That is the goal we are building towards with retirement. We plan to have total market index fu as were the dividend income is enough to live from.

I understand the total return approach but if one can live from dividends why not. We have family doing exactly that.
John C. Bogle: “Simplicity is the master key to financial success."
jebmke
Posts: 11382
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Anyone successfully living off dividends & interest?

Post by jebmke »

BogleFan510 wrote: Sun Sep 13, 2020 3:18 pm Probably qualify as in that camp. No regrets.
Same. Living on < dividends. Retirement decision for me was unrelated to financial considerations. 100% choice.
When you discover that you are riding a dead horse, the best strategy is to dismount.
FactualFran
Posts: 1138
Joined: Sat Feb 21, 2015 2:29 pm

Re: Anyone successfully living off dividends & interest?

Post by FactualFran »

My only income was interest and dividends from about 10 years ago to about 4 years ago. The amount of interest was much more than dividends Around that time, the interest rate of high quality bonds were higher than they have been during the past few years. The bonds were laddered and, anticipating inflation, the principle of a rung was higher than the previous rung.
000
Posts: 2670
Joined: Thu Jul 23, 2020 12:04 am

Re: Anyone successfully living off dividends & interest?

Post by 000 »

willthrill81 wrote: Sat Sep 12, 2020 10:35 pm I believe that 000's point is that imposing the restriction of ignoring capital appreciation is both unnecessary and deleterious to investors.
That is correct.

Although I will say for a very early retirement one should probably not take much more than the dividends.
rossington
Posts: 769
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Anyone successfully living off dividends & interest?

Post by rossington »

MathIsMyWayr wrote: Sun Sep 13, 2020 4:14 pm
CyclingDuo wrote: Sun Sep 13, 2020 4:06 pm
Scooter57 wrote: Sun Sep 13, 2020 10:17 amQuality dividend paying stocks have been bid up to very high prices which make it more likely they will decline in the future and which lower the dividend yield to yields that poorly compensate for risk.
You have that backwards, Scooter57. If the share price declines, but the dividend payout stays intact, the yield increases - not decreases, making it an excellent compensation for consideration at the time of taking the risk with a purchase of shares. I like buying dividend stocks when they go on sale like that. 8-)

CyclingDuo
Some stores jack up the prices of items some time before putting them "on sale." Are they a good buy?
If they are high quality and have an excellent history of being reliable.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Broken Man 1999
Posts: 4995
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: Anyone successfully living off dividends & interest?

Post by Broken Man 1999 »

I am curious, are any BHs capturing the capital gains that are available on their bond funds?

IOW, are any BHs treating their bond funds similar to what some Total Return advocates do with their equities?

Broken Man 1999

ETA: The HNW figure of $1,000,000 seems a pretty low bar to me. I qualify, but I don't honestly feel I am a HNW individual.

$5,000,000 seems a better bar to me, ansd I'm not there yet.
Last edited by Broken Man 1999 on Sun Sep 13, 2020 5:51 pm, edited 1 time in total.
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
User avatar
willthrill81
Posts: 20812
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

Broken Man 1999 wrote: Sun Sep 13, 2020 5:46 pm I am curious, are any BHs capturing the capital gains that are available on their bond funds?

IOW, are any BHs treating their bond funds similar to what some Total Return advocates do with their equities?

Broken Man 1999
I'm having difficulty understanding what is being asked.

TMK, 'capturing the capital gains' can only be achieved by selling the bond funds. Most here seem to only do that when either rebalancing or taking portfolio withdrawals.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
Broken Man 1999
Posts: 4995
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: Anyone successfully living off dividends & interest?

Post by Broken Man 1999 »

willthrill81 wrote: Sun Sep 13, 2020 5:50 pm
Broken Man 1999 wrote: Sun Sep 13, 2020 5:46 pm I am curious, are any BHs capturing the capital gains that are available on their bond funds?

IOW, are any BHs treating their bond funds similar to what some Total Return advocates do with their equities?

Broken Man 1999
I'm having difficulty understanding what is being asked.

TMK, 'capturing the capital gains' can only be achieved by selling the bond funds. Most here seem to only do that when either rebalancing or taking portfolio withdrawals.
Yes, that is exactly what I am asking. I just wonder about doing TR just like an equity holding. Our bond funds are more than adequate, even if I sold some to capture the capital gain. Frankly I am willing to sell down to my desired floor no matter what the reason. Of course that activity will allow equities to become a higher % of portfolio, but I will still have my desired base of fixed income.

I do not look for yield for our bond funds, I just want to maintain a floor. Sure, yield would be the cherry on top.


Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
User avatar
willthrill81
Posts: 20812
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

Broken Man 1999 wrote: Sun Sep 13, 2020 6:05 pm
willthrill81 wrote: Sun Sep 13, 2020 5:50 pm
Broken Man 1999 wrote: Sun Sep 13, 2020 5:46 pm I am curious, are any BHs capturing the capital gains that are available on their bond funds?

IOW, are any BHs treating their bond funds similar to what some Total Return advocates do with their equities?

Broken Man 1999
I'm having difficulty understanding what is being asked.

TMK, 'capturing the capital gains' can only be achieved by selling the bond funds. Most here seem to only do that when either rebalancing or taking portfolio withdrawals.
Yes, that is exactly what I am asking. I just wonder about doing TR just like an equity holding. Our bond funds are more than adequate, even if I sold some to capture the capital gain. Frankly I am willing to sell down to my desired floor no matter what the reason. Of course that activity will allow equities to become a higher % of portfolio, but I will still have my desired base of fixed income.

I do not look for yield for our bond funds, I just want to maintain a floor. Sure, yield would be the cherry on top.


Broken Man 1999
It sounds like you would be interested in McClung's Prime Harvesting approach. Karsten at Early Retirement Now did some nice testing of it and suggested some good improvements to it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
illumination
Posts: 859
Joined: Tue Apr 02, 2019 6:13 pm

Re: Anyone successfully living off dividends & interest?

Post by illumination »

Most people are just going to have to get used to spending down principal.

The people with high net values that could conceivably live off interest and dividends alone are likely also going to have a high standard of living they've become accustomed to and/or maybe live in a HCOL area every year won't be "enough" to be comfortable on that money alone (unless they are unusually frugal for their net worth, which definitely does describe some people here) A million dollars yields around $20k a year with something like a total index fund, around $11k with a 50/50 mix of bonds and stocks. Already you are way above what most people have saved for their retirement.

Also, some of the comparisons to real estate rentals, to do an apples-to-apples comparison, you'd almost have to look at an index fund and compare what it is paying today in dividend dollars versus the original price. So say VFINX was $35 for a share purchased decades ago, today the dividend pay out is around $5.25 per year each share, so that would mean those original shares are now yielding close to 15% per year in dividends. That's getting closer to a better comparison to someone that bought a rental a long time ago and what's it's getting in rental income today. You just don't see it as cash flowing the same way because the index shares have appreciated along with it. You see a $300 share price and only $5.25 coming out in dividends.
Smith303
Posts: 31
Joined: Sun Dec 06, 2015 7:31 pm

Re: Anyone successfully living off dividends & interest?

Post by Smith303 »

dbr,

Please allow me to express my gratitude & thanks to you the way you explained the preservation concept with your example i.e. return of capital, inflation and yield.

You sharing your investment knowledge and insights helped me changed my investment strategies to make my retirement secure and I continue to learn from your posts.

Thanks again

Warm Regards
Post Reply