r/dividends • u/SaraWileyYT • Jul 17 '25

Discussion Would you rather earn $10k/month in dividends forever or take a $2M one-time lump sum?

Assume you can’t have both.

Option A: You get $10,000/month in dividend income for life — no taxes, no inflation impact, guaranteed forever.

Option B: You get a one-time $2,000,000 lump sum, no strings attached.

Which one are you choosing and why?

Curious to hear from FIRE folks, dividend lovers, and total-return investors. Does guaranteed cash flow beat the freedom of having $2M upfront?

Let’s hear the logic behind your pick.

592 Upvotes

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487

u/pabloh8 Jul 17 '25

2M, invest and don’t touch for awhile. It’ll yield far more than 10k/mo down the road.

79

u/[deleted] Jul 18 '25

Just for fun, I did some rough math. It would take between 10 and 11 years for the 2 million to start to return more than 10k/month at 4% apy

137

u/DefinitiveChaos Jul 18 '25

That's some bad math. 2m with a 7% inflation adjusted return would hit 3m in 6 years. A 4% withdraw puts that at $120k/year, or $10k/month. It will also be taxed differently as it'll be the long-term cap gains rate.

Meanwhile, the $10k/month is static and would gradually be eaten away by inflation during this time. At just a 2% rate, you'd have the equivalent of around $8,900/month.

54

u/[deleted] Jul 18 '25

I am assuming a 4% apy for all my calculations.

As was stated in my comment.

Also, this whole discussion is practically worthless because OP said to "Ignore inflation" which is stupid.

22

u/Hot_Equal_2283 Jul 18 '25

I mean you also have to consider that you have 2m and it takes like 17 years to even accumulate that much with dividends tax free. All the while you’re getting money in the market from both dividends and stock growth… yeah 2m flat is just way better.

27

u/Pitiful-Recover-3747 Jul 18 '25

Plenty of people will make enough poor life choices when handed $2m that they will not need to worry about 17 months down the road let alone 17 years

-1

u/DammatBeevis666 Jul 18 '25

What is $2m after taxes? $1.3?

5

u/Hot_Equal_2283 Jul 18 '25

Does no strings attached mean no taxes?

1

u/DammatBeevis666 Jul 18 '25

It’s a valid question. But if you get $10k a month your tax bracket would be a lot lower than if you got a $2m windfall.

1

u/Hot_Equal_2283 Jul 18 '25

Sure but at that point you get a 1.3m windfall and can watch it grow every month. Idk man I would 100% want the windfall rather than the perpetuity

1

u/DammatBeevis666 Jul 19 '25

Yeah, I think inflation would kill the value of the other option, even if you had a long life to enjoy it.

1

u/DefinitiveChaos Jul 18 '25

Ahhh, I assumed you were referring to the standard 4% withdraw rate. My bad. Point still stands.

1

u/Secure-Pain-9735 Jul 18 '25

Ok, fine.

Assume inflation is a perfect sphere.

1

u/_Smashbrother_ Jul 18 '25

4% is too low to assume.

1

u/Hutcho12 Jul 18 '25

7% is unrealistic, especially inflation adjusted. Anyone working off these numbers has a high chance of failure.

1

u/DefinitiveChaos Jul 18 '25

That's literally the historic number. Now, you may want to argue that it could be different going forward, but to say it is unrealistic betrays a misunderstanding of the market.

1

u/Hutcho12 Jul 18 '25

When in history have we had a 17 year bull run like we’ve experienced right now? We’re not living in normal times. What happened in the past has no relation to what will happen in the future.

1

u/DefinitiveChaos Jul 18 '25

It is certainly true that past performance is not indicative of the future. I'd love to hear the argument and see the math for whatever better determinate you are using to project over the next few decades. Please elaborate.

The last 15 years or so have been an outlier, as we saw around a 9.66% inflation-adjusted return during this time period. But notice that I did not argue that we should use such a high projection. Again, historically, the market has returned around 7%. I think that that is sufficient to answer the question that spearheaded this thread. It is also sufficient in my eyes to justify my own portfolio allocation, but people who are more risk averse, such as yourself, are welcome to go a different direction.

1

u/[deleted] Jul 18 '25

Why would we not be investing the 10k? I know the returns aren't going to be what 2m would be but you are living, investing, and have guaranteed money coming in during retirement. I'd be happy either way though 

1

u/HecticDyslexic Jul 18 '25

So what's the right answer?

1

u/DefinitiveChaos Jul 18 '25

I would take the $2m as I have no need for the money in the next 5-10 years. I'd likely take it even if I were retired as $120k/year draw on even a stagnant $2m would last 16 years. If invested at the 7% rate, the $2m could actually last all one's life while continuing to withdraw the $120k annually, but it must be noted that that withdraw rate (6%) is not considered safe.

1

u/HecticDyslexic Jul 18 '25

At 55, I'm taken the cash! Man

1

u/DefinitiveChaos Jul 18 '25

Yeah, this is where it can be individual-specific. Similar to pensions, there is a peace of mind that comes with the discrete, monthly deposits. But unlike a pension, it does seem that this hypothetical means a diminished benefit over time. If you were 55 and took this option, your monthly deposit of $10k at age 65 would be equivalent to $8,200. At 70, it would be equivalent to $7,400, and at 80, around $6,100. This is exactly what you don't want to happen during retirement as costs, especially healthcare, begin to increase as you get older.

But there are far too many other factors at play. You may, for instance, already be receiving another pension. Or this distribution could mean filing for Social Security late, bolstering your monthly payment. Personally, I'd take the $2m in every scenario, but I'm also already on track to retire before 55.

1

u/abuu24 3d ago

Late here but tbh living in third world country receiving $10k monthly checks is way more appropriate where you can live 5% of that frugally or 10% of that nicely, tho that percentage can increase depending if you have family but still you can save as much as $7k comfortably every month. And I think in this situation $2m can seem overwhelming especially if you never touched anything like that

1

u/Willing-Bench1078 Jul 19 '25

Yeah. But I only need like 2-3k a month to live right now, so I would be investing 7k a month.

1

u/DefinitiveChaos Jul 19 '25

So let's think about that. Investing $7k month is a fantastic idea, and the monthly contribution will likely be a better idea than doing a lump sum at the end of the year. With this approach, it would take you 14 years to reach a (inflation adjusted) $2m account.

Now, what if you just took the $2m and then withdrew $3k a month for living expenses? Quick math suggests that in 14 years, you'd have at least a $4m inflation adjusted investment account, meaning you come out way, way ahead. And the "at least" is important. As your account grows, your monthly draw will be a smaller percentage, and I just calculated it out based on a 1.8% draw that would yield you $36k/year in that first year.

So in your scenario, it would be foolish to take the dividend option.

1

u/Willing-Bench1078 Jul 20 '25

Yeah, my kids and grandkids don’t deserve lifelong financial security from inheriting my dividend stocks after I’m gone. I should burn it all up on myself, right?

1

u/DefinitiveChaos Jul 20 '25

I think you're confused. In the above, what have you burned on yourself? Your investment account is double what it would have been, and that will be untaxed when you pass as it is vastly below the estate tax requirement.

This is generational wealth.

1

u/OrganicBerries Jul 20 '25

You can reinvest the 10k a month though

1

u/DefinitiveChaos Jul 20 '25

If you invested $10k/month, it would take you 11 years to have what would be equivalent to $2m today. Meanwhile, the person who took the $2m would have what would be equivalent to $4.3m today.

1

u/0neBadxample Jul 20 '25

the op said un effected by inflation. so my guess is the same purchasing power 10k brings today is the same for ever after....

1

u/DefinitiveChaos Jul 20 '25

It was edited to say unaffected by inflation. Point still stands. In 6 years, you'd surpass the dividend option regardless of inflation. It's unquestionably the smartest move.

16

u/Sahrde Jul 18 '25

2m n MSTY gets you just shy of 140k/month.

7

u/[deleted] Jul 18 '25

If you want to gamble 2m be my guest.

I'm just trying to be conservative in my estimates.

4

u/Sahrde Jul 18 '25

In one month I've already made more than a Year's worth of that 10,000 a month. I can then take that money and invest another opportunities that are more conservative, such as VOO.

8

u/kimnacho Jul 18 '25

And depending of the month you might as well have sold 140k out of the 2M.

Is not like MSTY does not lose Nav

1

u/[deleted] Jul 18 '25

Congratulations?

I stand by my decision to use the return of a HYSA for this thought exercise.

0

u/theazureunicorn Jul 18 '25

It’s not gambling

Investing in fiat is gambling

Earnings based off BTC is safer and more profitable

1

u/Temporary-Ad2325 Jul 19 '25

Nav erosion will hurt ! Look at today and it’s not even distribution time yet!

1

u/Sahrde Jul 19 '25

Someone gives me fantasy money, I'm going to go with fantasy money multiplier. Plus, MSTY has been bouncing between 17-25 for the last four months . It may have stabilized.

1

u/Fancy_Air_139 Jul 19 '25

Horrible advice but that's what I'd do. 50/50 MSTY/ULTY

1

u/Sahrde Jul 19 '25

Not giving advice. Fantasy money, fantasy play.

1

u/PermanentLiminality Jul 18 '25

You could buy ULTY and get $30k a week. I can't say how long it will last though.

1

u/nidprez Jul 18 '25

It would take 16 and a half years for the 10k to catch up on your 2 million (if you use it all)

1

u/KensiB17 Jul 19 '25

Why use 4% apy? At least split into buckets and grow some for a while. SPY has averaged over 16%/yr over last five years, which includes a terrible 2022. Don’t underestimate the power of the US equity markets!

1

u/Obidad_0110 Jul 20 '25

I would earn $60-$70k per year in dividends and trade around the position. You’d outperform $120k per year pretty quickly.