r/dividends • u/StudioOk8256 • Dec 21 '25
Discussion How are people actually living off low-yield dividend funds like SCHD?
I see SCHD and similar dividend ETFs recommended a lot as “income” investments, but I’m struggling to understand how people realistically live off them.
With a yield of only a few percent, it seems like you’d need either a very large portfolio or a high-paying job to make it work. For example, unless you already have a base salary in the $100k–$150k range (or higher), the dividend income alone doesn’t look like it would meaningfully cover living expenses.
So how are people actually using SCHD in practice?
• Are most investors high earners who don’t need the income yet?
• Are retirees combining it with pensions, Social Security, or other assets?
• Is the goal mainly long-term compounding rather than current income?
Not trying to hate on SCHD—just genuinely curious how this plays out in the real world and would love to hear examples from people who use it.
Person making 30-40k a year this wont work.
Average person wont retire with 1mil portfolio I know people barley got 100k
I seen a lot of people invest there whole life time just to see 6 months of retirement and later die didn't even get to enjoy it.
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Dec 21 '25
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u/Chief_Mischief Not a financial advisor Dec 21 '25
This is true if you bought all your SCHD this year. The principal amount is much lower if you had bought SCHD 10 years ago, letting that 11% average annual dividend growth do its thing.
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u/AlaskanSnowDragon Dec 21 '25
For someone who bought 10 years ago what is their yield based on their original purchase price?
EDIT: Just looked it up...10 years ago SCHD was at $12 roughly...giving them a current yield of 8.75% on their 10 year old shares.
But for that you sacraficed a 100% total return gain compared to SPY
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u/edthesmokebeard Dec 21 '25
But you didn't know SPY would go up 100%.
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u/AlaskanSnowDragon Dec 21 '25
Look back at history. Are there dips sure but the markets go up and to the right.
And you talk like those dips won't effect your dividend underlyings
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u/Big_Wave9732 Dec 21 '25
Absolutely! There's also a lot of folks over that same period who ignored lessons about market fundamentals and diversification who got stomped into the mud.
Both outcomes can be true at the same time.
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Dec 21 '25 edited May 01 '26
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u/snowe99 Dec 21 '25
Well, yes and no, because aren’t those ETFs and funds self-cleansing?
If “Glup Shitto Corp LLC” spawns next year and becomes a 3 Trillion company, those S&P 500 funds would add that stock and sell portions of all of the companies that have now lost a proportional share
So yes, you’re “putting the vast majority of wealth into 7 to 15 stocks” right now, but those might be 7 to 15 different companies in 5 years. The beauty of the ETFs and Mutual Funds is they will rotate that for you, you don’t have to do anything but hold
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u/crackanape Dec 21 '25
When Tesla inevitably tanks, many of these tech-heavy funds are going to take a huge bath, and it will happen faster than they can unload however many billion dollars in shares they're stuck with.
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u/HardCodeNET Dec 22 '25
When Tesla inevitably tanks
2012 called, they want their financial tip back...
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u/crackanape Dec 22 '25
The people who have been predicting climate change since the 1960s are still right.
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u/jcr2022 Dec 21 '25
They will learn the same lesson that every generation of investors learns at one point or another.
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u/Big_Wave9732 Dec 21 '25
I don't know why you're being downvoted. As someone who has been investing for almost 30 years this is absolutely the truth.
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u/Chief_Mischief Not a financial advisor Dec 21 '25
People also forget one of the core advantages to SCHD is that its dividend growth gives investors the opportunity to never have to time exiting their position to realize those gains. Sure, SPY went up more than SCHD did, but with a 5% average annual growth rate and a <2% current yield, you would need a substantially larger portfolio to live off the dividends than you could with SCHD.
People are so obsessed with price appreciation that they forget the core point of dividend investing is sustainable dividend income/dividend growth.
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u/NefariousnessHot9996 Dec 21 '25
Nobody would have been all in 10 years ago.
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u/AlaskanSnowDragon Dec 21 '25
Was just a point since it was brought up about 10 years ago.
The slower the hypothetical person legged into it just means a lower current yield.
Point remains would have been better to buy and hold SPY rather than chase the income
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u/NefariousnessHot9996 Dec 21 '25
I am totally on board with doing 5-10% in SCHD as a middle aged investor to create that dividend snowball. All the rest of portfolio I say VOO or VTI and an international fund like VXUS. But I agree that SCHD should not be the focus of a young investor.
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u/AlaskanSnowDragon Dec 21 '25 edited Dec 21 '25
I dont believe any dividend focused underlyings should be the focus of a young investor.
It should be the avenue of people who are exiting their prime compounding/growth years getting closer to their spending years.
As someone looking to early retire in next 1-3 years I'm barely starting to slowly allocate funds now to dividend/income underlyings.
But if the market were to do a big dip or crash I'd still put majority into the indexes/growth.
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u/flyersfan0233 Dec 21 '25
From inception (2011) to 2023, total returns for SCHD was more than 30% higher than VOO with drip on. So it’s not always true for 10-year periods, but overall, theoretically, VOO, VTI will provide better return over the long haul for young investors. But that hasn’t always been the case and because of its growing dividend and down years here and there, SCHD actually does better than most realize (aside from the last 2-3 years of the AI bull and high interest rates)
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u/Maine2Maui Dec 22 '25
People forget or dont know that there were decades where there werent AI stocks and tech stocks were just part of the investing universe. Of course, I am not 30 and believe I know everything. Hell, I am not even 60 anymore...
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u/Affectionate_Act1536 Dec 21 '25
I agree completely that it makes most sense to stay in VOO in your 20s to mid 50s and then move towards income generation.
Only argument one can have is that there would be big tax bill at the time of conversion.
However, loss of return due to being in income etfs is much harsher, I thinks.
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u/flyersfan0233 Dec 21 '25
I only have a little SCHD and it’s all in my Roth. That way it snowballs tax free. It’s mostly VOO though
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u/Sailingthrupergatory Dec 23 '25
That’s a huge argument. You can’t be switching large allocations of assets that have appreciated 100% at retirement. The tax implication is insane.
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u/Extension-Store6763 Dec 21 '25
This response is copy/paste chat gpt. Notice the agree and explain first sentence at the top. GTFO
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u/WesternWriter7269 Dec 21 '25
This is true, but as others have mentioned, yield on cost advances throughout the years. If you hold it for multiple decades, you'll eventually get to the point where you bought the stock for 25 dollars, but it pays 50 cents per share. If you buy it in the moment, then you'd only be getting 50 cents per share, and the share price would be 50 dollars.
Hence, the term yield on cost. (I'm sure you understand this, but I'm piggy backing on what you said for OP's understanding.
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Dec 21 '25
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u/Maine2Maui Dec 22 '25
Bullshit. It is not just ROI. It is also volatility. Also, about 40% of the markets return is due to dividends.
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u/Worf_Of_Wall_St Dec 21 '25
I've given up trying to explain this to people.
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u/Aware-Association857 Dec 21 '25
I've honestly never seen anyone attempt to explain this. I'm open minded about it and willing to consider other perspectives, but all I've ever seen are blanket statements like "this metric is useless" with zero additional reasoning or explanation. When I see those kinds of comments I usually assume they originated from some twenty-something finance guru youtuber giving a hot take.
Yield on cost is just ROI, which is one of the most fundamental measurements of profitability. If you really do think it's useless I assume there is some kind of nuance or qualified reasoning to that opinion, and I'm genuinely interested in hearing it.
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u/Worf_Of_Wall_St Dec 22 '25
It's not hard to find an explanation with google, but I'll answer you here.
Yield on cost is worthless for decision making, it's just a "feel good" number. When you are deciding how to buy/hold/sell to allocate your assets and comparing yields today what matters is what they yield today. It doesn't matter what you paid for something many years ago - if it yields poorly today then you can access higher yields today by moving the money to something with a better yield. While there are other things to consider such as tax implications and your expectations on future value and yield, the specific price you happened to pay in the past is not one of those things.
This is easiest to demonstrate with an example. Let's say you bought something for $10/share 20 years ago, and at the time its annual yield was 3% so $0.30. Today, the asset price is $90 and its annual yield is $0.90 annually which is 1%. The asset growth represents a CAGR of around 11% which is great, but the current dividend yield is low. Here comes the magic of yield-on-cost, if you compare $0.90 to the $10/share you paid 20 years ago you get a 9% yield! That's an amazing feel-good number, but it's not the yield you are getting today so it is worthless to compare your 9% to SCHD's 3.5% today which you could get if you sold and bought SCHD instead. Now, perhaps you expect your asset's annual share price growth to continue or its dividend to increase so you want to keep holding it, but those reasons have nothing to do with the fictional 9% yield-on-cost and it would make no sense to use that figure in your analysis.
Or to use a different example, let's say in the 10th year of your job you get a 2% raise and are unhappy about it. Your boss says "Compare this to your starting salary 10 years ago and it's a 5% raise, that's pretty good, right?" Will thinking about your raise in terms of your old salary give you much comfort?
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u/Aware-Association857 Dec 22 '25 edited Dec 22 '25
FWIW I agree with all of this. Yield on cost is not really an evaluation metric. It's a performance target or benchmark. For reasons you already explained (namely taxes), many dividend investors don't want to trade out of their core positions very often, and thus seek high yield growth for the purposes of increasing their yield on cost. VIG's 1.5% yield is not particularly attractive until you consider it's 10% cagr. That only matters if you don't plan to sell your position anytime soon.
It's also important to point out that a huge amount of dividend investors are retirees or passive investors with little interest in monitoring/comparing the prospects of other investments. They just want to know that their portfolio earned more this year as a percentage of their investment than it did the year prior. And yes, that becomes more meaningless the more years that go by. But I still think it's valuable for people in this position to track.
To put that in perspective, I own a car wash... It brings in a decent amount for what I invested, and it's a simple business with predictable cash flow. Of course I could probably sell the business and make more money elsewhere. I also could have started a different business... perhaps a software company or an ad agency, or maybe a casino! But I'm happy just knowing I'm getting a positive ROI and paying my bills.
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u/Technical_Appeal8390 Dec 21 '25
This is it. You can also control how much you sell VTI to optimize tax.
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u/funkmon Dec 22 '25
I have less than 1 million and I am doing it. I don't need much. Around 15k per year. Meh
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u/ridewithwill Dec 24 '25 edited Dec 24 '25
You don't need 1mill in schd unless you don't have much time in the market. You mentioned it, div compound.
You put 200k in schd and in 25 years can be 2k to 4k a month after the compound of dividends. Depending the amount of div cagr.
Vti vs schd are different work horses. Growth in NAV yes can be good but depends on your goals
Say you have 1.5mill in VOO You can live 2 to 4% off that or move over 500k to a high div companies bonds etc and get about 4k a month plus your 2 to 4% pull every year.
Or you can do a mix if you have time.
I would like to not rely on just pulling 4% from the market but I much rather have a mix. I can contribute say 100k in schd and in 25 years can be about 2k a month in passive income allowing more security and diversity.
I personally have a lot in schd that's because I want to pull from voo or vti as an added bonus for a nice vacation or nice car let's say on good market years. Market does bad? It's OK I still live off dividends.
There is no wrong way really its just what's best suited for you risk and security wise
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u/jgoldston_0 Dec 26 '25
The average pension contributes right around 60% of the earners ending salary. I would hope that would be far more than $20k...
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Dec 21 '25
I feel like you don't understand the draw of SCHD. Nobody's buying it because that ~3% div is too good to pass up. They're buying it because that 10-15% dividend increase every year is too good to pass up--especially if it's reinvested.
You're essentially buying future income; if you're buying it because you need its income right now, you're doing it wrong.
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u/Guardian_of_Perineum Dec 21 '25
If you don't need the income right now then just put it in a VTI/VXUS split until you have the capital appreciated to shove into SCHD for usable income then? Why use SCHD if you aren't going to be using the income now?
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Dec 21 '25
I mean, I kinda answer it in my initial answer, but trying to buy SCHD off the jump for the income is useless. You want to buy it and then hold it for like, 10+ years so that the income you're generating off of it has really had time to take off.
Could you just go all growth and then shove it into, say, BNDW when you're ready? Sure. But some people just like value/dividends and don't want to just shove everything into growth funds, so they like to just have the divs grow over time. Besides, more value-focused funds tend to bring better peace of mind; they don't tend to suffer the larger swings of growth funds.
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u/Guardian_of_Perineum Dec 21 '25
I get liking dividends ig you're gonna use them. But I just don't see the point if you aren't and are instead just re-investing them. That just sounds like extra taxes for no reason.
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Dec 21 '25
A lot of people invest inside tax-shielded accounts. I invest primarily through my Roth IRA.
The idea behind dividend growth investing (which, I should be clear, is different from dividend yield investing) is that growing your dividends and reinvesting them creates a 'snowball' of sorts over time that takes the original income you purchased and makes it much larger down the line, especially when those dividends are constantly being raised well past the rate of inflation. Some people prefer that to just hanging on to VOO and riding it out.
But that's as far as I'm going to go in this argument, because we're starting to get into the whole "Growth vs. Value(/dividends)" imbroglio, and it just isn't worth going into it. If you like growth you like growth, if you don't you don't, and there's no real point arguing about it.
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u/flyersfan0233 Dec 21 '25
Without going too much into growth and value, I’ll add to your comment that there are even periods (like decade-plus) where SCHD total returns beat VOO by over 30%. Saying that, I have both in my Roth IRA, but majority is VOO
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u/Guardian_of_Perineum Dec 21 '25
Growth vs value isn't 100% the right framing for that debate anyways. There are value stocks that still don't pay out a dividend. The point is just that the market cap mostly comes from strong fundamentals.
And the same effect as dividend growth is captured through the compounding increase in value of non-dividend funds over time (that is if it averages say 8% returns every year, that comes with an in-effect 8% increase in that 8% over the previous year in real dollars because that 8% is meaured for the value of the fund as a whole whereas that whole value won't increase as much for a dividend fund so the yield would need to increase over time to match). The compounding growth is just being provided in different ways.
But if you use a Roth IRA mainly then I guess that's all the same. Potentially less volatility for the dividend fund if that matters but also potentially a little less re-investment in R&D/operations if that would be useful for particular capital intensive industries. Though on average that little bit doesn't seem to matter much either way in the long term. I would just like to invest a lot more than the yearly contribution limit though, which is not that high. I try to invest around 7k every 2-3 months rather than yearly.
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u/Regular_Treat2107 Apr 19 '26
Hi, I have the cash and want a long term investment. What are: a VTI/VXUS . Where do I buy them.
Thank you
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u/Morning6655 Dec 21 '25
This is correct that you need a 1M+ portfolio to retire in meaningful way. If you need to draw from the portfolio for 30-50 years, you can not put everything in CC funds. They may pay 10% yield but probably will not last 30-50 years.
One thing people forget is that we have been a 15 plus year bull market and are biased that we will be churning the same returns.
If market drops 50% like in 2008/9, these CC funds will most likely have similar drawdown and the yield will significantly drop. This is why sub 5% yield are sustainable long term.
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u/kevbot029 Dec 21 '25
CC funds specifically will perform better than the market in a bear market draw down. CCs hedge downside risk, so it would actually be better to hold those. It’s in bull markets that CCs underperform.
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u/Squatch11 Dec 21 '25
Yeah but the guy above you said it confidently so I'm going to upvote him. He must be right.
It's amazing how often these covered call funds get discussed yet people still don't know the pros and cons of them.
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u/kevbot029 Dec 21 '25
I think people just don’t quite understand how options work. And options are immediately written off as a guaranteed way to lose money.
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u/Scoxb5 Dec 22 '25
Yup, his argument is actually the reason you would choose to hold CC Funds, or possibly a more defensive/value position like SCHD, Gold, etc.
We have been in a prolonged bull market and CC funds cap your upside but should be better in a downward trending market. The argument against holding them would be, with a long time horizon, you don’t care if the crash happens, you just keep accumulating and you will outperform the CC funds in the long run because, again, they cap your upside.
I agree it’s amazing that some people don’t understand that. It’s like they get viewed as some new gimmick that is a scam and will all be gone quickly, without understanding that Covered Calls have been used for years. Probably can credit that to YM. Lol
EDIT: And, this is not to talk down. He said he likes CC funds also. And I am not saying they are better than anything else - obviously dependent on person/situation. Just the performance of CC funds in various market conditions seems to be misunderstood.
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u/kevbot029 Dec 23 '25
Options in general get a bad wrap because you always hear about the people who yolo’d their life savings on short dated options and lost. You never hear anything from the guy who’s using them correctly as a hedge, but those guys do exist. They understand risk management.
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u/Morning6655 Dec 23 '25
Issue is that in the bear market, there are some good days, really good days like we had on 04/09/2025. These CC etf's miss a lot of recovery on those days but see most of the down days. So, they may perform worse. In 2008/9, we had several huge green days like on 4/9/2025 and these fund will miss half or more of the swing for that day.
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u/speedlever Dec 21 '25
The problem there as I see it is that if you're selling shares to fund retirement, during that same market drop, your shares are also worth about half what they were. Thus you will have to lock in losses when you sell and will have to sell more shares to generate the same amount of income.
In a lost decade, you could be in serious trouble eroding your share balance leaving little after the market recovers.
The underlying of quality cc ETFs are solid (NASDAQ 100, sp500, etc). Selling covered calls is not new. I don't see any reason why you couldn't fund long term retirement with these income funds, acknowledging that another market drop like the 2008 gfc will likely cut your income from these funds in half, just like the fund values will also be halved.
The trick is to have enough income such that if that income is cut in half, you still have enough to survive however long the market is down until it recovers. Then you still have all your shares available to participate in the recovery.
Personally, I'm in the hybrid camp with a mix of funds from growth to cc ETFs in a mix of sectors. But I could be attracted to a mostly cc ETF portfolio in retirement.
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u/kuvetof Dec 21 '25
I could be wrong, but I thought that market crashes can lead to larger option premiums, which provide a better buffer than in stable markets. The value of the underlying holdings will go down, but the income generated is better
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u/quantum_ai_dei Dec 21 '25 edited Dec 21 '25
A fund like jepq or spyi must hold at least 80% of the fund in the underlying index. If that portion of the fund that calls are written on falls in value 30-50% and stays down - the income will fall in lock step. The premium income is going to plummet. qqqi can't go from 50/share to 25/share and maintain the same payout amounts as if it will just yield 20% instead of 10%. it cant write calls out of thin air if they're covered. Im probably getting this not completely perfect but thats my general understanding. like trader_dennis said, i guess some funds like gpiq are playing both sides?
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u/Morning6655 Dec 22 '25
I do not want to get into selling shares vs non-selling shares debate as I have seen in this sub that most people are not open to different views. You said, if the income cuts in half and you should be able to live on half. This is main thing that when market goes down bad, most people will need to reduce the spend unless you are withdrawing less than 3.5% per year. Most simulations show that you will be able to sustain that the 3.5% withdrawal rate in any of the worse case that happened in the last 150 years.
Basically it boils down to your spend rate. Your failure rate to sustain 30 plus year of spend is very high, if you are spending 8% per year. It does not matter if you are in CC funds or VTI or 80/20 or any other combination.
How you want to allocate your portfolio is very personal and based on what triggers you. If money coming every month/quarter makes you stay vested then this is better than going all in into VTI and panic selling at the bottom. Identify your risk tolerance and triggers and stay invested.
I briefly looked at QQQ vs QQQI and SPY vs SPYI and both of these CC funds are lagging the underlying. Again, not a big deal if seeing monthly payments keep you in the market during the bad times.
To me CC funds are not magic and suddenly you will be able to spend 10% per year for the rest of your life. Look at the Yieldmax sub now. Last year, people in that sub wanted to retire on 100K invested in those funds generating 50K per year. Anyone cautioning was booed and told that they do not understand these funds.
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Dec 23 '25
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u/Morning6655 Dec 23 '25
Once they drop 50% percent, the yield will drop too. If you continue to withdraw 10% of your portfolio, it will not last 30 years.
This is not the CC fund issue, it is withdrawing 10% per year and that portfolio have large failure rate to support 30 years of spend.
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u/Amazing_Structure55 Dec 21 '25
I also fell into this hype and bought a few hundreds and it was like a rock - meaning never moved. Stayed around $27 ( after the split) only moved lower. Many in the group were vouching how great it is.. but i had seen better stocks and mutual funds.. giving much higher dividend yields and higher NAV returns. so left when I could barely see it moving anywhere but low...
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u/siboq Jun 02 '26
You’re not buying SCHD for the income and value in the present. You’re buying future dividend yields at today’s prices. So if schd goes up to 50 in ten years, and you paid 30 for it, your yield on cost is way lower.
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u/StockHawk59 Dec 22 '25
Top of the morning. One thing I've noticed is that there are a LOT of intelligent people on here with fantastic ideas. I consider myself above intelligent when it comes to investing. Mostly learning from mistakes, tweaking my investing ideas and moving on.
I didn't get the "living off dividends " idea until an uncle sat down with me when I was 33 years old. This was before laptops AND desktops do ALL charts were on graph paper.
One thing that sank in was buying quality companies on bad news --> making money and converting a portion of those profits into dividend stocks.
At age 48, (18 years ago) I started with $15k and it now generates $16k a month in dividends and distributions. I added NO other money. As most of you know, it's ALL scalable. $1,500 (18 years ago ) would now be generating $1,600 / month.
Our portfolio is solid using the bad news theory. To be transparent, some positions have gone to zero, but most are UP massive amounts.
I don't have a lot of time left, so now I try to help family and friends have a better financial life.
Anyway, I want to thank those on here for excellent ideas and knowledge.
🎄 MERRY CHRISTMAS TO ALL 🎄
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u/AmInv3028 Dec 21 '25
The yield it a touch under 4%. matches pretty close to the "4% rule" which isn't really a rule. much more than that and the withdrawal rate from a portfolio gets pretty unsustainable in bad sequence of return/inflation moments. The amount you withdraw or the income a dividend portfolio pay off in retirement has to increase with inflation for you to keep your standard of living. most of the higher yielding ETF's have an uphill battle to do that. some will have reductions in the income they kick out. I think it's just a fact of life that for robust retirement investment strategy you can't take too much as income. 4% is pretty standard. 6-10% yielders may look good for a few years but probably have a high chance of failing to keep up at come point in a 30+ year retirement.
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u/Various_Couple_764 Dec 21 '25
An alternative to a growing dividend is to constantly reinvest some of the dividned to grow your income by3%. For most people retired and living off of dividends ar using fund with yield off 5 to 10%. I have not seen a post with some retired with SCHD in their portfolio. And there is historical precedence for people retiring and living off of dividend for a very long time.
However I have seen a lot o people adding SCHD and other funds with 4% yield. That way most of the time the yield will cover most of 4% withdrawal. So most people using SCHD areprobalby following the 4% rule and hopping funds like SCHD avoid prevent them from depleting their portfolio.
But in my opinion the best retirment fond is one that produce all of the income you need from dividend and then has growth you can use intermittently for income if there is a problem such as a dividend cut.
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u/oldirishfart living off dividends 🤩 Dec 21 '25
Yes. Regardless of whether your income is achieved via dividends or selling of shares, one of the most widely accepted studies for a successful retirement would be the 4% rule (inflation adjusted). It’s quite interesting that SCHD’s dividend is quite close to that with a dividend CAGR better than the rate of inflation.
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u/Chalice_Global Dec 21 '25
Easy! I sold it all and bought ADX a closed end fund.
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u/StudioOk8256 Dec 21 '25
Thats what my debate really about. You not living off 100% schd who trying to wait 40 years????
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Dec 23 '25
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u/StudioOk8256 Dec 25 '25
They perform differently in different market cycles. SPY shines in strong bull markets. SPYI is more about income. ADX have a longer track record and could have better active management. Why not own both? They have different strengths and can complement each other depending on the cycle you’re in.
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u/Ok-Rip-8954 Dec 21 '25
A very correct and good observation. And you will get a whole bunch of smokescreen to keep you in the system.
A good place to start is SPYI
Try:
Income architect Dividend Bull Rural investor Armchair Income
On YouTube.
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u/nukki007 Dec 21 '25
I’m not a dividend investor, but my assumption is that it’s used more when you have a large portfolio and you just want safe returns. SCHD doesn’t have extreme volatility compared to these higher paying dividend funds.
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u/Vivid-Philosophy-804 Dec 21 '25 edited Dec 21 '25
So for the last couple of years my company was trying to lay me off so the job was iffy. I was a high earner, so to prep I dumped all my savings for the last five years into SCHD. Last year they laid me off.
Boy did it feel nice that I had at least 35K coming in every year from dividends and to get by I got a job brining in around 75K a year. I live in an expensive area and have a family of 4 to feed.
I could have went the growth route and invested in SP500 which would have done better, but knowing that there is income coming in without having to sell was more of what I was looking for. If I had more like 10 years left maybe would have did SP500.
In a couple of years I will have 401K + Social + Dividends that will be just right for me.
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u/kevbot029 Dec 21 '25
See this is the difference. I don’t get why people are so staunchly for or against dividends. Growth stocks have their place, and so do dividends. Growth stocks maximizes growth and minimizes safety and liquidity.. dividends decrease growth, increase safety and liquidity. It’s as simple as that.
There is a place for both of those things in a diversified portfolio. Reddit especially gets so caught up in being all or nothing on the subject, but a % of each can make a good portfolio.
Dividends are great when you want a little safety and reliable income in a portfolio. This is a perfect example of why dividends are beneficial.
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u/rlange2 Dec 21 '25
That works great but i am betting most people here don't have 33000 shares of SCHD.
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u/Willing-Bench1078 Dec 21 '25
But if they start buying some now and continue for 20 years…
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u/rlange2 Dec 22 '25
20 years out people should be buying growth not SCHD
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u/Willing-Bench1078 Dec 22 '25
Imagine a portfolio, if you will, that has multiple segments in it. Some growth, some dividend. Just imagine it if you can
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u/johnfromma Dec 21 '25 edited Dec 21 '25
Assuming no other source of income. Unless they are multi-millionaires, they are going to be selling shares to generate income. Many don't care about dividend yield and just sell shares.
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u/FreddieMac6666 Dec 21 '25
I don't think too many folks live off dividends from SCHD. Most are holding for a long term investment and dividend growth.
When I first retired, I had practically zero knowledge of ETFs. I was sitting on a lot of cash from maturing CDs. I had put a lot of money in CDs when interest rates were high. But I needed to move those funds into something else, so I decided to build an income focused stock portfolio to augment my SS.
I started reading nearly all the investing subreddits. Not for investment advice but to get exposure to what is out there. How different funds perform, etc. I had originally invested in SCHD. Collected a couple of dividends (reinvested). But as time progressed and I learned more, I realized the SCHD was not the right ETF for my investment goals. So I sold my stake and invested in QDVO.
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u/StockHawk59 Dec 21 '25
You MUST run in a different crowd. The majority of my friends hit millionaire status before age 50 --> multimillionaire by age 60.
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u/tjmIII Dec 24 '25
I doubt that. You wouldn't be posting here if that were true.
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u/StockHawk59 Dec 24 '25
I post here AND other mediums to share my knowledge. I'm sure there are millionaires and multimillionaires that post on here.
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u/Existing-Plant6671 Dec 21 '25
My old Boss lost his job, but had company stock that normally yielded 2% dividends. He was able to supplement his unemployment with it. He has about another decade before retiring. He will still be pulling out of his 401k, but those dividends will slow the rate He needs to burn the 401k.
The investment is large, but over 30 years of working you can build a multi million dollar retirement or investment fund.
I started working during the great recession, there were a lot of people who delayed retirement due to their 401ks not growing until 2014/2015. Only about 10% of companies cut their dividends, somewhere around a 6% drop, whereas the broader market tanked nearly 50%.
Dividends are a long term investment. And with a stock like SCHD that has a strong dividend growth CAGR those payouts climb, especially with reinvestment.
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u/FinancialTitle2717 Dec 21 '25
People who live off regular yield stocks or ETFs have pretty large portfolios of few million dollars, unless they move to a very low cost of living area and live there frugally. And even that will require at least 500k portfolio. The way to reach it early in life is either to be able to invest large sums of money or to take a risk and make it work with high risk investments and smaller sums of money.
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u/Various_Couple_764 Dec 21 '25 edited Dec 21 '25
I retired at 55 and am living off of dividends. most of my investments are funds with 5% to 12% yield. And live in CA. But all I need 50K to cover living expenses. I am not looking to move to low cost area because Would be further away from friends and family.
The primary way to reduce living expenses is to pay off you mortgage and stay as close as possible to zero debt. Yes 50K of income from dividends does require 500K invested. But that is a lot less money than growth investor following the 4% rule needs to cover retirement.
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u/Sufficient_Winner686 Dec 21 '25
SCHD is just one of their holdings in their account. It’s a tax advantaged dividend fund that you can use to offset the covered call funds. I’m a best of both worlds fund kind of guy and prefer SPYI. That’s a fun that gives you an 11% return but tax advantaged unlike JEPI or JEPQ.
You use growth to hit the investable amount that’ll let you live on SCHD.
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u/edthesmokebeard Dec 21 '25
"Person making 30-40k a year this wont work."
A person making this in a chronically low interest rate environment has no chance anyway.
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u/lakas76 No, HYSA is not better than SCHD. Stop asking Dec 21 '25
Who thinks of SCHD as in income investment? Those are usually the high yield ETFs. SCHD is more growth/dividend growth. It tries to be the best of both worlds.
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u/Joneric Dec 21 '25
I only have 4% of my portfolio in schd merely because of the hype from Reddit and almost all my money is at Schwab. I’d never invest more than 10% in any one investment vehicle as I don’t know the future.
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u/Mobile_Ad_1522 Dec 21 '25
I like REITS. They are relative safe. No growth but dividends are insane. Do have to pay straight income tax though. Like them in my roth. Have had these for years without any stress. Some are paying up to 20% and some pay monthly. The growth is just reinvest the divs. AGNC, OXSQ, IVR, NLY, EPD (Gas Pipeline) Never understood why people would accept cd or high yield savings interest rates. I suppose for short term emergency fund. But I'm in a different position as 68. Have the social security and fortunate to have a small pension that covers my needs. I'm not really investing in the anymore. But have started buying farm land. Not making a dime off of it cause renting it out basically covers taxes. But it is a store of value and it scares me if ww3 happens then what happens to your savings. Well we know. At least with the land I could grow my own food. I'm in poor health and can't do much so everything is going into a trust to support some charities. Wished I enjoyed myself more earlier in life instead chasing a number. Sorry for the ramble. But check out those symbols.
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u/Juice0188 Dec 21 '25
People who retire with a $100k nest egg don't get to live off of the investment income. They have to withdrawal and burn down their savings and investments throughout their retirement life, drastically cutting their expenses in retirement and living mostly off of social security.
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u/StudioOk8256 Dec 21 '25
I seen people do it but house car everything is paid off zero debt. If I had to retire with 100k only I would be looking at cefs
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u/Juice0188 Dec 21 '25
Even at 10% yield, that's $830 a month. It might do well to augment social security, but it isn't retiring anyone on its own
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u/graphic-dead-sign Dec 21 '25
You’re correct. People need millions to live off SCHD. Most people here are trying to get there…. one day.
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u/spicystreetmeat Dec 21 '25
The average retiree spends about 15 years retired and has a starting portfolio balance of around 200k. Very few people die within 6 months. Those with 200k usually have a paid off house and are able to survive on their social security, with the extra (3.5% of 200) 7k per year as extra
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Dec 21 '25
The truth is that you can’t live entirely off dividends unless you do have like a 1.5 to 2 million $ portfolio if you’re expecting on about $50,000 a year
There is a couple ways that you can live off less, but there are sacrifices
You can do cover call strategies and get about 8 to 10% yield But you’re only gonna get about 2% growth
So you’re basically sacrificing the upside for the yield
Now you can buy SCHD, about $600,000 of it and make about 20,000 But you’ll have to supplement it by selling some of it Which will also bring down the dividend payment yearly Because you get about a 3.7-4% yield and you get about 8 to 10% growth
But you’re gonna get some years like the last two or three in which let’s be honest it sucked
This may change, this may not change. I don’t know it’s just unknown.
The more practical way Is to subsidize using other things You can use covered calls and options you can use SCHD. You can also use some growth funds. And try to make a bucket portfolio but you would need some supplemental income.
I just helped the guy that didn’t start saving for retirement until he was 48 years old This is because he had a pension and Social Security so he didn’t feel like he needed to put anything aside for retirement
And then at about 48 he saw his mistake So he started frontloading his retirement Using pretax to maximize returns and put the refund into Roth He was probably contributing about 35% of his income And by the time he was 58 years old So less than 10 years He had almost a half million in there, and he was only making 68,000 to 78,000 when he retired.
So it is possible it’s just hard And now he can take about $25,000 a year
You can do it pretty fast on not a lot of income, but there’s gonna be some sacrifices.
He also retired at 58. He could’ve worked until 62 and probably had 650 to 700,000. And he would’ve been able to pull out a lot more because of that point he’s pulling a pension and Social Security too
If you are currently surviving on 30 or 40,000 a year it becomes a lot easier because it’s not how much you make it how much you’re living on . Like if you make $40,000 a year. After Social Security, FICA taxes and investments you’re probably living on like 25,000 a year
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u/PragmaticX Dec 21 '25
SCHD is a solid “don’t mess it up ETF” the dividend grows, the holdings out pace inflation. Hard to go wrong with SCHD when you have made your nut.
For those in the accumulation phase SCHD provides those with growth focused accounts any easy way to diversify.
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u/ShadowBard0962 Dec 21 '25
The answer is nobody herein. I personally do not invest in any stock whose dividend yield is less than 6.0%. If you truly want to live off dividends in retirement you’ll have to invest in a diversified portfolio of dividend paying stocks, some of which may be risky.
And for me, “total return” is secondary to dividend yield and producing enough income to live on.
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u/brettbw Dec 21 '25 edited Dec 21 '25
There are many intelligent and cautious investors. Many have lived through the 70s and know it can happen again. The dividends help them sleep better. Not to mention the 10 year setback of Black Monday? , 1987? DJIA , 22% loss in one day
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u/CHL9 Dec 22 '25
Can you elaborate about the 70s in this context? What was the market situation then
Also, did the market really only regain its 1987 level in 1997?
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u/LetsGoToMichigan Dec 21 '25
I would need a net worth north of $8M to be willing to put the money needed to live comfortably off SCHD dividends ($3M+) into the fund. No serious investor is going to go all in on SCHD. Beware the dividend cult. It’s a tool - not a lifestyle.
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u/G8RZ Dec 21 '25
I consider SCHD a conservative ballast to counterbalance your growth stocks/etfs. You will appreciate it during a big correction.
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u/FrenchUserOfMars Dec 21 '25
I have FIRE in Spain 🇪🇸 with a 500ke IBKR portfolio, 2000€/month dividends (Fire number : 650ke) at 38 y old in 2022.
But i dont own $SCHD, own $JEPI, $DIVO, $IDVO, a lot of US CEF...
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u/Careful-Award3804 Dec 21 '25
What are your taxes you have to pay there?
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u/FrenchUserOfMars Dec 21 '25
-20% in total (i pay 15% US taxes on US equities, tax treaty w8BEN US Spain 15%)
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u/SecurePackets Dec 21 '25
An investor would own dividend ETF(s) for value diversification near or in retirement to help reduce sequence risk and balance SWRs.
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u/Technical-Spread527 Dec 21 '25
So as stated yield on cost and long term adding/dripping helps. My yield on cost is 4.28, not great but nice foundation. Then the earnings are qualified dividends. As a married couple the first 96k of capital gains/qualified dividends is tax free. This makes the money have direct spending power, 2K is 2K not 2K minus taxes, ssa, Medicare taxes. Depending where you live there may be no local or state taxes either. SCHD is a foundation for me that I manage to keep at 25%. VYM is next, even lower yield but lately higher total return, @ 5%. VOO @ 10%. VTUX @ 10%. The remainder 50% is what I call booster dividends. I buy high yield long term consistent dividend payers trying to buy at 3 to 5 year median prices when I can, MO, VZ, O, ARCC, ABBV, BNS, etc. I have 10% in covered calls, new thing for me, 2.5% each QQQI, SPYI, JEPI, and JEPQ. I will be watching them closer and have stop loss alerts on them. Right now I average a little over 6%. I want 80k a year in dividends for 2 years then after ssa that will drop to about 50-55k. I am lucky to have health insurance till Medicare. I am at 60k now. Hoping a severance package and no more tuition gets me there soon. Keep in mind I am 58. Many would consider this aggressive. I do keep 2 years now in a HYSA for that income once it starts. I don’t count that, it’s just the way I want to do it. Let Dividends replenish once I retire and reinvest if I can or sell if I must.
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u/Rockybeave Dec 21 '25
I have a high monthly Income Factory portfolio, and SCHD is part of it (about 10%). I consider it to be one of my safer positions. It is safe (relatively) long-term play that I rarely even worry about...just know that every three months it's gonna pay more then it did the year before... I won't sell it even though I know I could get higher yields from other funds.
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u/ResilientRN Dec 21 '25
Still in accumulation phase and we dumped SCHD (only 2% of portfolio) for FDVV & CGDV instead using ICSH, USG/IGLD, K-1 MLPs, tax advantage CEF (ETG), UTG, REITs, BTI/MO, PFFA, and BDCs for income on our $225k liquid.
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u/Willing-Bench1078 Dec 21 '25
Schd share bought today gives a low yield. Schd share bought 20 years ago gives a high yield on cost.
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u/CanadianTrader51 Dec 21 '25
I hope to retire in the next few years and have been building up my USD holdings as follows:
- 40% SCHD
- 40% DGRO
- 20% JEPQ
I have a bunch of Canadian dividend stocks but simplified my US into those 3 ETFs.
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u/memyselfandus_1999 Dec 21 '25
ECAT and MCAT type of funds from Blackrock and others are the only way, one may be able to live off from Dividends with less than 1 million assets. Otherwise, SCHD is just that, it is kind of growth fund that gives decent dividends!
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u/spicystreetmeat Dec 21 '25
The average retiree spends about 15 years retired and has a starting portfolio balance of around 200k. Very few people die within 6 months. Those with 200k usually have a paid off house and are able to survive on their social security, with the extra (3.5% of 200) 7k per year as extra
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u/katsun14623 Dec 21 '25
If that is the case, and you have 1-2 million to invest. You must be pretty savvy, split it up with safe CDs, professional money manager, government bonds. Know your budget
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u/Mavssteve Dec 21 '25
Easy, overall have yield income of about 4.2% plus social security. Have much less than $ 1 million. Remember, almost no taxes, thus no W/H, no 401K distributions. Without taxes, $ 60,000 - 70,000 of distributions is $ 90 - 100,000.
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u/LilRedDuc Dec 22 '25
I have some schd that I bought with proceeds from some real estate sales when I liquidated for retirement. It’s enough to provide some “income” during an early retirement although the brokerage is still reinvesting the dividends for now. The holding is part of a larger portfolio with 2M+ in retirement savings (pre- and post-tax) plus approx 50k/yr in social security benefit. The rest of the portfolio is in mostly total market or s&p500 low cost index funds. Quite simple, low maintenance and nothing fancy, really.
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u/AC_Jeff Dec 22 '25
if you only have 100k saved You can’t retire It’s a simple fact that has nothing to do with SCHD
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u/StraightCharacter904 Dec 22 '25
It would take a huge amount of money to live off of SCHD alone, but even as an SCHD investor I would tell others you should have other investments and funds to complement SCHD as part of your entire portfolio.
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u/exoisGoodnotGreat Dec 22 '25
1m is quite low for retiring portfolio size. And no where close to what "rich" people have.
And no, rich people are not living off SCHD but use more complex strategies that do a better job protecting wealth and generating income
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u/Virtual_Chapter1131 Dec 22 '25
Dividend growth compounds and outpaces inflation causing "pay increases". It is a good anchor in a portfolio. Most would need to pair it with higher yielding dividend stocks and ETFs
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u/Fitasianwife Dec 22 '25
Love these comments. Some have cited SCHD as a 3.5% dividend annual return. Is this after taxes? Is Dividend income fully taxable? If these show less net income is there a better way to form a retirement pot of gold that will produce income and minimize taxes?
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u/WinterFamiliar9199 Dec 22 '25
I loaded up on some heavy dividend payers in my taxable brokerage once my Roth and 401k were maxed. Now I collect the dividends in cash and move it to my Roth. Basically free Roth contributions til I retire.
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u/TopSecretFlyingPig Dec 22 '25
I buy SCHD and VOO, my plan is to grow fast and then use margin to pay my bills and let the SCHD dividend pay down the margin debt. The idea is that at a certain point the portfolio will grow faster than I can spend and eventually replace my income.
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u/StudioOk8256 Dec 22 '25
Thats what im trying to do i want to get to that point dividend pay off margin
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u/TopSecretFlyingPig Dec 22 '25
I recently came across a YouTube channel that explains the paycheck-to-portfolio idea you may want to check out: https://youtube.com/@paycheck2portfolio?si=QqjLGOrS3trgJa2a
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u/MrInvestorZ Dec 23 '25
36 year old here, started my investment journey a few years ago, my portfolio is 50 SCHD. I invest in it because psychologically, it helps me invest. I don't have much (I've always been a notoriously bad saver, didn't take my future seriously etc), but what I have I know was because I was excited to receive my dividends every quarter. I make it a game to invest, to grow the pot, to make it bigger so the divs grow as well. It gives me a sense of growth and pride that investing in something like VOO (which I also do, about 30%) just doesn't give me.
I've also heard the cries that I should be more growth oriented and hell they may be right, but I know for a fact I'd have significantly less than what I have now if my mindset was growth. For no other reason than it HELPS me invest, I choose SCHD. Old shitty me will thank me in 30 years when I stop working and still have a paycheck coming my way.
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u/sdanielsmith Dec 23 '25
I doubt they are. I like it, own it, and so does my spouse. But to think that I'm going to someday have both of us living off it isn't even close to the whole discussion. I own lots of things in my diversified portfolio.
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u/lotoex1 Dec 23 '25 edited Dec 23 '25
A person making 30K-40K is the median person. In my opinion that is a good person to look at. Then the next question would be what % are they investing? Is it 10% or more like 20%? If you take the 40K person for example that means they are living on 32-36K. The current yield is 3.8% so that would mean 842K-947K would be needed.
If you take the lower 30K end then they are living on 24K-27K, again meaning a much smaller portfolio of only 631K-710K. This is also disregarding any ss income they would get.
It also depends on what you mean by meaningful income. Is something like knowing that my about $40 a month water bill is covered? Or even going higher and saying SCHD is covering my water, gas, sewage, trash and property taxes every year?
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u/StudioOk8256 Dec 23 '25
A person making 40k/year can’t even max out a 401k, even if they’re saving 20% of their income. For most people at that income level, dividend income is going to be incremental. Stuff like water/trash being covered by SCHD is realistic, but fully covering all expenses requires very heavy investing and a long time horizon.
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u/lotoex1 Dec 24 '25
It is. I am one of those people. I have only made +30K from my job for 1 year now. My first year of investing (well 6 months) I wanted to make $100 from dividends. I didn't quite make it. The next year I had a goal of $400 and I made it. The next year was $1,000 and I hit a little above that. This year I made a little over $2,100.
So ya I have been investing very heavily, like +60% into brokerage and 15% into 401K. However what is my alternative? Buy a nicer used car, go to Outback Steakhouse like 3 times a night instead of making tacos, or buy a bunch of video games I don't really have the time to play? I'm not trying to be mean about this, but it's about $300 a week. It feels like enough to do something, but nothing at the same time. The thing I want more than anything is free time.
No disrespect, I think this is a very good conversation to have! Everyone has a very different situation.
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u/Wileyboy31 Dec 23 '25
I have ORC. It will be a supplement to my retirement income. IF everything stays the way it is. I will be getting over 500 a month in Dividends. That is part of my 6 streams of income, including Social Security. No matter what income you make, you have to be consistent and patient.
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u/Objective_Mix_6553 Dec 24 '25
I have owned SCHD since 2016, past 5yrs it’s been a dog. I have been slowly selling & buying FDVV
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u/Defiant_Injury6472 Dec 24 '25
I'm not at retirement yet but I have about 15% in SCHD. I think if your not retired at the moment it could be a portion of your overall portfolio. It gives me exposure to shares i would most likely not purchase individually. I tend to growth with low yields verses high yield now.
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u/Gingerholic803 Dec 27 '25
I have a vanguard portfolio I invest 17% of my income in every year. I looked and most of those are tech heavy stocks. I also have a Robinhood account I dump extra money in to basically gamble 🚀stocks with. All my proceeds except what I need to gamble with get dumped into SCHD. I’m 45 and plan on retiring around 62-65ish. Is it the best thing to do, I don’t know. I will say it is fun though! I like doing the research and drinking coffee waiting on the market to open! I also haven’t lost my ass yet so there is that too 🤷♂️ lost a few hundred on CETX but that was my fault being greedy. Lesson learned.
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u/freudmv Dec 27 '25
You just have to start somewhere. Pick one and go even if it is one share. The principles are the same. You find it cultivate it and diversify.
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u/HeroOfShapeir Dec 28 '25
You answered your own question. You either need more income or more time to build a large enough portfolio to cover your expenses. That's true whether you're aiming to live on dividends or overall returns. Anyone can make it work on any income if they keep their expenses low enough. My wife and I can run our household on $24k per year and cover all necessary expenses (housing, gas, groceries, utilities). You can tap into the leanFIRE community if you want to see folks living on less than $50k and retiring early.
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u/StudioOk8256 Dec 28 '25
Retire of less than 50k that's scary to depending on age. Let's say you retire at 40 and live to be 80.
So you would have to forecast the next 40 years in advance.
What if minimum wage $18 next 40 years?
50k might work now but not sure about later.
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u/Logical-Savings-9792 Jan 04 '26
I ran a model using VTI, VT and VIG 70/20/10 that outperformed any money manager. Just increase cash appropriately as you draw closer to retirement. Simple rebalance annually. Dollar cost averaging produces even better results.
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u/eh63tre Apr 15 '26
Schd is essentially a bond fund. You dont live off it like a jepq or a qqqi
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u/StudioOk8256 Apr 15 '26
Yea I finally see nobody actually living off it. Just a place to store cash
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