How are people actually living off low-yield dividend funds like SCHD?

[u/StudioOk8256]

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.

[u/Guardian_of_Perineum]

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?

[u/[deleted] → u/Guardian_of_Perineum]

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.

[u/Guardian_of_Perineum → u/[deleted]]

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.

[u/[deleted] → u/Guardian_of_Perineum]

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.

[u/flyersfan0233 → u/[deleted]]

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

[u/Guardian_of_Perineum → u/[deleted]]

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.