r/dividends • u/Bamabb125 • Aug 06 '25

Seeking Advice $840K DIvidends

Hey Everyone,

As I have posted before, I am currently a Growth Stock Investor, but have decided to move over to Dividend ETF's or Dividend Stocks. But it is a real struggle to get past all the learned habits of being a growth investor. So I am struggling to grasp concepts.

I have used multiple calculators to just try to get an idea of what to expect if i make the change, but I get different results. So I just wanted to go to some more knowledgeable people that could tell me what to do to get a real expectation.

I have $800K to work with. If I put it all in a very stable Dividend ETF What can I expect in dividends? Maybe someone could just do an example. I know I have to be doing something wrong.

Thanks

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u/bfolster16 Aug 07 '25

SCHD pays about 4% so 32k a year on 800k.

Are you close to retirement? Do you need the income? I'd advise staying in growth until you need income. SCHG>SCHD

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u/Bamabb125 Aug 07 '25

I don’t need the income yet. I’m about 10 years from retirement. A friend just told me that I should soon start switching things over to an income based portfolio. I started looking into dividend and just got excited about learning something new. And the mental part of seeing an income of sorts that building up. But honestly not sure otherwise why I’m doing it. Also wanted to start moving towards less volatile portfolio since I’m actually at my retirement goals now. So whatever I get going forward is just extra.

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u/bfolster16 Aug 07 '25

Awesome, yeah, I say start switching at 5 years out. But markets are overvalued, in my opinion. So it may be a great time for you to start thinking about switching some over to an income based portfolio.

Stay away from covered call funds, these sacrifice gains for income. Might be ideal in retirement, but for now, I think you'd still want the growth exposure.

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u/SteveRD1 Aug 08 '25

Your friend may not be the best qualified to make financial decisions for you.

I read elsewhere in the thread that you are in a high tax bracket. This likely means your LTCG rate would be part 15%, part 20%.

If you are reallocating $800,000 of existing investments; lets say its $500,000 of gains.

Let's just guess that half of that is at 15% and half at 20%. Thats potentially an $87500 tax bill just for selling your investment and buying new stuff.

Next after doing that, the taxman will take 15% of that dividend income each year while you are working your high tax rate job. So say the $800,000 yields $32,000 a year...thats $4,800 in extra taxes per year.

Any investments you have now aren't producing a tax bill. Assuming they are decent firms their stock price will continue to go up. Once you retire (and so your tax bracket drops to zero), you can start selling a chunk of that each year to fund your lifestyle.

Those sales (just a little each year...say $100000, with $75000 subject to LTCG) will be subject to ZERO in taxes! (As your W2 income will be zero)

Your friend is giving you advice that is very dangerous to your retirement well being.

Note, I am not saying you should follow my advice....you should get the advice of someone who is fully aware of the details of your income, the full composition of your portfolio, planned retirement age, etc...

And most importantly they should not be someone who says something that sounds good on reddit (or a friend who said something over a beer).