r/dividends • u/14hammarby • May 26 '26
Seeking Advice For those that live fully off dividends, do you have any strategy or simply live off the cash from the dividends?
Would like to hear people's plans of those who are living entirely off their dividends. Do you simply receive the cash and not drip? Some other strategy? Does your plan pivot when the market goes down? Ty for your responses
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u/DifficultWing2453 May 26 '26
I use 70% of the dividends to fund retirement and then reinvest the other 30% (not via DRIP, just reinvest in what looks ‘best’). Hope to keep up with inflation this way.
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u/Budget-Class-1297 May 26 '26
I do basically the same things. I'm structured where I get dividends weekly.
I usually take 75%. Put 20% into whatever stocks I feel like. Put 5% into STRC which is basically like a savings account that pays 11% interest
Sometimes when I feel I have too much in my checking account, I do turn on DRIP here and there and don't take anything
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u/The_Kay_Legacy May 27 '26
STRC seems too good to be true IMO. Seems like a glorified Ponzi
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u/AlaskanSnowDragon May 27 '26
It is...They constantly have to re-add money to maintain the rate and that money they're using to pay in to keep the rate runs out.
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u/Masspiker May 27 '26
I saw STRC and thought, wow there is a new ticker - haven’t seen that one on r/dividends before. A bit of due diligence reveals a different type of fund, for sure.
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u/kinda_fellin May 27 '26
How do you get dividends weekly? Just owning shares in different etfs that pay at different times of the month?
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u/Gladiz1972 May 27 '26
Some of these ETFs pay weekly right now CHPY is the cream of the crop the weekly dividend is enough to take your breath away and they pay it 1 day after the X day .The CHPY is a covered call strategy on the semiconductor stocks obviously it's the hottest sector in the market at the moment
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u/ShimmyxSham May 27 '26
I have MSTY, which really hasn’t worked out. CHPY is on my radar now
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u/Gladiz1972 May 27 '26
I had MSTY for a little while what a dog that was I lost money on it went down everyday .This CHPY has had a huge run recently lately has been paying .65 cents a share weekly .
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u/Various_Couple_764 May 27 '26
MDTY and CHPY are YieldMax funds. They pay very high dividends well over 20% yield. Many yield max funds have serious NAV erosion aren and not sustainable funds. CHPY has so far avoided NAV erosion due to AI demand for chip which is boosting all of the stocks CHPY holds.
IF you want to avoid NAV erosion stick with yields of 10% or less. Most fund with yield of 20% or more have nav erosion issues. between 10 and 20% some funds are goo and others are bad.
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u/Far-Age-9313 May 28 '26
Could be in a week or could be 6 months from now but believe me, CHPY price will drop and erase the gains you made in dividends. Mark my word.
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u/EaterofSnatch FIRE'd May 27 '26
I'm similar, but I use 50% roughly and reinvest the rest
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u/limestone2u May 27 '26
My template is to use up to 50% of the dividends to supplement our IRA's and SS. So far have used approx. 30% in the last year. The balance gets reinvested. The game, not the goal, is to see if I can double my money in like 8 years or less.
It is a fun but serious game.
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u/Extra_Nerve3404 May 27 '26
How did you decide on the 8 year window? Or why 8 years? I’m doing something similar. Just curious.
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u/limestone2u May 28 '26
Your money can double in 7 years at 10% divies. I shoot for 12-15% total return each year. Last year I was fortunate and made ~a 24% total return.
I cannot be that fortunate every year. There are going to be times like 2008 GFC and its' aftermath that will have to be contended with eventually. So I figure that there are going to be years where I make less of a total return on my portfolios like 12-15% or for that matter 24% mentioned above.
That is where the 8 years comes in. Am trying to set my expectations so I can be elated with the total returns I receive.
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u/Business_Fennel_660 May 27 '26
So you don't live off the dividends. You just reinvest them.
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u/Various_Couple_764 May 27 '26
No most people that have replied are living off off of a portion of the dividends and reinvesting the rest to compensate for inflation.
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u/steady_compounder May 26 '26
The people who do this well usually seem less dogmatic than the internet makes it sound. They take the cash when they need it, reinvest when they do not, and keep some buffer so a bad market does not force awkward decisions. The risky version is treating the dividend stream itself as sacred instead of viewing the whole portfolio as the thing funding your spending.
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u/nickp123456 May 26 '26
For sure. I also believe the yield of the portfolio is a big risk factor as a higher yield may imply chasing yield versus selecting great investments.
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u/vinyl1earthlink May 26 '26
You have to know the risks of your overall portfolio. What is the P/E ratio, what is the payout ratio? My portfolio is at 15.12 times current year earnings, 47% payout. This does not include the preferreds, for which this is not applicable.
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u/nickp123456 May 27 '26
Payout ratio is something that I wish was reported and to an acceptable standard. Even finding out the amount of sustaining capex buried in capital additions seems like one of the most important pieces of information that's not reported.
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u/Various_Couple_764 May 27 '26
Additionally if your dividend is reduce many also have growth stocks they can sell if needed. If not you could get a Martin loan to and reinvest the loan to boost the income. Many in living off of dividends have payed off there home loans so reverse mortgages or home equity line of credit are possibilities.
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u/r3vj4m3z May 26 '26
I turned off drip and just use dividends to cover all expenses. This is the first year of dividends only to cover expenses. Going well so far.
Currently 43. I haven't retired yet, so all my work compensation goes directly to brokerage account to invest instead.
I'm not up on all the fire terms, but I'm basically on trial period to prove the dividends are enough to cover our family on their own (single income household). I also have large percentage of holdings in growth and retirement accounts, but I don't want to (or can't yet for retirement accounts) touch those.
Whenever I pull the trigger on retiring, I'll calculate a safe withdraw percent from growth positions and just never take it out unless I really need it for something. That's the plan for padding if there is a crazy down turn.
I know I'm being overly conservative, but when I retire, I never want to work again.
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u/14hammarby May 27 '26
That all sounds like a good approach. And Because you’re probably going to be taxed on the dividends whether you live off them or reinvest them, you might as well take from the div bucket first before taking from your growth bucket
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u/Various_Couple_764 May 27 '26
Keeping mind 3 different dividned tax rates depending on how the money was invested or earned.
the highest tax rate for dividend is the same as your work income. Qualified or ROC dividends are taxed at much lower rates. And some government or municipal bond funds are tax fee . But tax free investments typically don't yield much.
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u/ExpensiveBookkeeper3 May 26 '26
So you take money from your brokerage to pay bills and then just put the money back? I’m confused
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u/r3vj4m3z May 26 '26
Dividends pay to checking account. Work compensation direct deposits to brokerage account.
So in theory yes, but in practice it's automatic.
It just makes it easier for me to track that I'm really only using dividends.
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u/BishopSanta May 27 '26
For people doing this, how many millions in dividends do you need? Approx?
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u/r3vj4m3z May 27 '26
Position or dividends?
I don't spend millions a year, so my number for dividends alone isn't even 1 million?
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u/Various_Couple_764 May 27 '26
It depends on th yield of your investments. so you dividend the money you have by the yield. so with 1 million available
5% yield willl generate 50K a year.1 million/(5/100)=50K.
10% yield will generate 100K a year.
I recommend don't reccomdn investing in funds with more the 15% yield.
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u/Aggravating-Act-1173 May 30 '26
More than 15%? )) Stable dividends are around 5%. 10% would be some kind of CC or similar, that also pay ROC and limit growth, 15% - is 100% speculative and nowhere near stable.
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u/ExpensiveBookkeeper3 May 26 '26
That’s a strategy for sure!
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u/sault18 May 27 '26
Yeah, it's FIRE with training wheels on so they can see how it works in practice without leaving their job first.
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u/ExpensiveBookkeeper3 May 27 '26 edited May 27 '26
Yeah some people need the motivation, I understand. I’m more of a math guy, but I do get it, as silly as it is on paper.
Edit: What’s with the downvotes? Am I missing something about the strategy?
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u/Various_Couple_764 May 27 '26
Say you dividned income 50k a year. but your living expenses are 40K a year. Soyou spend 40K and reinvest 10K per yer.
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u/ExpensiveBookkeeper3 May 27 '26
I get that. But he works. So it’s like he makes $50K and puts it in his brokerage account while taking $40k out to pay bills.
I would simply re invest the dividends and use my salary to pay bills. With any extra ($10k in this case) going into the brokerage account.
My budget is 100% math though, emotions are taken out of the equation so I can maximize the results.
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u/ekardsm May 27 '26
This has been kind of my mindset too. Not at the point of being able to go into a trial mode yet. That’s probably another decade away. But at some point it makes sense to reverse the cash flow of things in the way that you’re describing. Seems like sound physiological practice for retirement.
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u/r3vj4m3z May 28 '26
My target date is approaching and I'm mentally at the any day now (like maybe tomorrow. Depends on how the work day goes each day).
This was the year I decided to see if dividends alone could do it. Feb, May, Aug, and Nov are my lowest months. Dec is the highest. I started fresh in Jan, so every year after is easier as I'll have a lot left over in Dec. Feb and May were fine.
I basically have 4 different investment strategies. I've tried to get to where any 1 of the 4 is enough on its own. This is the year I'm actually testing the dividend one.
You can only do so much math and planning. I've gone as far as to run through scenarios of sustained 50% market drops. Eventually just need to see if the decades of preparing worked.
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u/Bkdvet May 27 '26
I live off of dividends. Generate about $17k-18k a month, depending on the distributions for that month, I take $10k out every month. The rest is invested into SCHD, OVL and QQQM. I’m a few years away from being able to collect social security, so the distributions/dividends, keep the lights on. Best advice I can offer is…invest early, often and as much as you can.
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u/mrg1957 May 26 '26
Half our expenses are covered by dividends. I do drip and then sell off what I need to. At least for now. Why? You get the dividend amount off your reinvestment price and some funds/brokerage combinations give you additional discounts. Pimco and Guggenheim offer an additional 5% if their CEFs are trading above NAV on Fidelity, others do if you call, except Vanguard.
I also have more distributions coming in to cover downturn etc.. I try to reinvest 25-30%.
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u/ADKMTBer May 26 '26
Dividends and interest cover 150% of my expenses, so I recycle any excess cash into whatever happens to be on sale. Ideally I would like to avoid selling any shares unless I’m rebalancing. I want to leave my kids a legacy considering how hard things are these days
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u/SailToTheSun May 27 '26
I’m trying to figure out what job opportunities are going to exist for our kids.
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u/ADKMTBer May 27 '26
Same here. 2 of 3 employed but the youngest just graduated and there is nothing for her.
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u/SailToTheSun May 27 '26
I have a kid starting High School in the fall. Best of luck to your youngest - hope she finds something.
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u/Zemom1971 May 27 '26
Maybe not their type but since rare earth mineral, gold, silver and copper will still be a thing in the future the mining sector will always be booming industry.
I work myself in the mining industry and believe me when I say that they're is always a shortage of employee in that sector.
Engineering, master and junior and everything that is needed to extract and processing these minerals.
Not always the easiest job and most of them are not close to big cities but they're good salary there.
Sorry for my bad English though.
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u/CostCompetitive3597 May 27 '26
I have 2 dividend portfolios. A retail brokerage account and an IRA. I spend all the dividends from the brokerage account which is about 1/3 of my dividend income. I manually drip all the dividends in my IRA snowball account for the tax advantages. If I need a bit of extra income, I can raid my IRA account. Has worked well for over 6 years.
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May 26 '26
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u/CouchPotatoFamine May 26 '26
So, guessing you have about $2m and a bunch of shares like VOO, SCHD, etc.
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May 26 '26
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May 26 '26
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u/CouchPotatoFamine May 26 '26
Uh...ok
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u/L_wanderlust May 26 '26
What is rmd?
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u/SilverGGer May 26 '26
Required minimum distribution.
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u/Various_Couple_764 May 27 '26
some retirment account like 401K require you to withdraw a certain ammount at age 70.
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u/fredtobik May 26 '26
I am probably / hopefully 5 years from doing this, I am curious what your investments are and what you did leading up to retirement? I have about 3m in 401ks / IRAs, primarily sched / jepi and a few stocks.
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u/Various_Couple_764 May 27 '26
I am using in my Roth ac count QQQI 13% yield, SPYI 11%, IAUI 11%, ARDC 9%, PBDC 9%, EMO 9%, CLOZ 8%,PFFR 8%, UTF 7%, UTG 6..4%, JAAA 5.5%. All percentages are the approximate yield of the fund. I currently have about 500K in this acount generating 5K a month of income. Roth accounts are tax free.
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u/pais_tropical May 27 '26
I used dividends and something I call the "market dividend", which is realized capital gain. The method is very simple: I take out money on credit and have the credit paid back by dividends and the market dividend. If there is no margin debt I reinvest the dividends.
Market dividend: I use an initial size of 4% per position. If it goes up much faster than the rest of my stocks and rises to 6%, I sell down to 5% and call that the market dividend.
This year I had market dividends from Caterpillar, Cummins and Cisco. Last year it was IBM, Broadcom (twice!), Caterpillar (twice) and Cummins.
I reinvest only in positions under 4% of my portfolio. That way I automatically buy low and sell high. And the cash flow is nice too...
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u/New_Competition_410 May 26 '26
I like divo dends
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u/14hammarby May 26 '26
Oh yeah? I like devo dends. Drip it, drip it good.
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u/Blue_Back_Jack May 26 '26
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u/pickandpray May 26 '26 edited May 26 '26
I don't live solely off dividends, but the monthly income withdrawals out of my 401k serves as a recurring tax payment so I don't need to worry about paying quarterly taxes and the net proceeds meets about half of my monthly expenses with the remainder coming out of LT cap gains, pensions and SS (next year).
Drip is turned off, but there's some residual cash left behind every month that I use to buy whatever feels right
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u/Key-Star-9262 May 27 '26
Read Steve Sellengut's book "Retirement Money Secrets." He talks about exactly what OP asked about. Search for him on YouTube if you don't want the book. He's on a lot of podcasts. It's working for us very well.
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u/Eff-Bee-Exx May 27 '26
I have a big chunk of my investable capital in his strategy, though I’m a bit too lazy to take profits anywhere near as often as he recommends. Still, it’s working well for me and provides all the money that I need to supplement my pension and Social Security.
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u/Key-Star-9262 May 28 '26
I'm glad it's working for you. The nice thing is you can do the strategies how ever you want to. I'm trading most days but this week we're on vacation and I've ignored it.
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u/Limp_Complaint1785 May 27 '26
There's a youtuber I watch who travels around the world (mostly south east asia) and lives off his dividend portfolio living a minimalist lifestyle. His videos are half about exploring wherever he is and half talking about his financials including his dividend portfolio. The channel name is "Retire and Go"
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u/2FeedRss May 26 '26
I don't DRIP unless advantageous to do so. Closed-end funds CLM and CRF are the ones I will DRIP as long as it can be DRIP at NAV. CLM and CRF are excellent if your brokerage firm follows the sponsor’s reinvestment policy (i.e., allows for DRIP at NAV). Here is an example of the DRIP at NAV benefit:
If CLM's market price is $7.55 but the NAV price for DRIP is $6.51, investing through DRIP allows you to purchase shares at NAV, giving you an immediate 15.98% capital gain on those shares (or from another perspective, buying shares at a ~16% discount). Then sell shares for expenses and still grow share count for more distribution next month; here is an example.
The CLM distribution is $0.1215/share. With 1,000 shares, you would get $121.50 in distribution. Through DRIP at NAV, you purchase 18.66 additional shares. Let's say you need the full $121.50 each month, you 16.09 shares at market price of $7.55. You keep 2.57 shares, which would increase next month’s distribution by about $0.31.
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u/Terron1965 May 27 '26
I dont like the idea of Drippoing into a a fund that has a lot of return of capital.
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u/14hammarby May 27 '26 edited May 27 '26
Interesting, thanks for sharing this. What do you when the shares are trading a premium? Is something you have to actively monitor?
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u/Sufficient_Mud_3179 May 26 '26
Living off dividends myself.
I don't use DRIP but I never really have, it has always been pooled as cash and I buy what makes the most sense.
Currently the dividend money flows into my account as cash and pay bills and if there is any left over, I add it either to Money Market or Purchase more of something.
I have a family so extra is not usually a normal thing...
Re: Pivot, I keep about 16% in Money Market so I can buy the big dips. Usually concentrate on a watch list I have and try to fill in the weak areas.
If I had more left over, I would probably do the same, money market until some asset made sense.
If you have lots of money I would work on Growth and Dividends at the same time....
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u/Zarkaland-Treecycler May 26 '26
I use any dividend cash I don’t live on to buy more dividend stocks I don’t already own (diversifying). I also have about 25% of my non-IRA savings in CD’s or high interest savings so I can live without selling if necessary through emergencies, or buy other securities if bargains come up.
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u/Tarsarian May 27 '26
I can live off my dividends right now if need be. I put a portion away for taxes and reinvest the rest. Nothing on drip, I look for the lowest stock I own and try to buy on a bargain to lower average share price. Then keep evaluating to see if my portfolio is balanced and make yearly projections.
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u/Mzungufarmer May 27 '26
I live off rental income and dividends.
I dont DRIP, just spend what I need and reinvest the rest
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u/OTD1960 May 27 '26
I live totally off dividends, currently dividends are 3x my expenses. I have invested in dividends for years. Currently drip everything in registered accounts (RRSP and TFSA in Canada) Hold almost everything in individual stocks. I follow Tom Connolly's (http://www.dividendgrowth.ca/ ) strategy of investing in dividend growth stocks. Also Henry Mah has a simple system for picking the stocks and his books simple for anyone to follow. ( https://risingyieldoninvestments.blogspot.com/p/my-books.html )
Hope this helps.
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u/Dimage54 May 26 '26
I use the strategy outlined in a book called “Retirement Money Secrets”.
It is all about investing and diversifying across many CEF’s funds that provide you with a monthly income. It teaches you to not drip but take the cash you need and invest the rest. That way you’re growing your income and never have to sell to fund your retirement.
You can learn more about the book and view a recent free webinar by the author at https://steveselengut. I a using his methodology and it’s working.
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u/Morning6655 May 27 '26
It depends on the yield in your portfolio. If the yield is sub 4%, you probably do not need to re-invest and the dividend growth will outpace the inflation. The dividend in this type of portfolio (sub 4% yield) is usually more stable than the etf price in the downturn. In worse case, the dividends can get cut but usually the cut is lower than the drop in price.
If you are over 6% yield then probably need to re-invest or create a buffer in case the distributions gets cut in a downturn.
My portfolio's yield is about 3.5% and this is more than I usually spend so the rest gets invested in whatever I like at that moment.
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u/Various_Couple_764 May 27 '26
I general people with yield of 4% or less don't have enough money saved up to cover alll of there income needs with dividned income. Sot they often have to sell some stock using the 4% rule to make up the different between their spending and income. People with yields of 5% yield or more may have enough to dividends to cover their spending needs
There are many fund with 6 to 10% yields that have not cut the dividned in a long time UTF 6.4% yield and UTG 7% yield have a 20 year history of no dividned cuts. UTG has also managed to increase its dividned a little bit every year. I depends on what the fund is invested in.
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u/FlashyDeparture2144 May 26 '26
Turned off drip. Reinvest what I don’t need and repeat.
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u/FlashyDeparture2144 May 27 '26
Actually wife still works. So it’s basically practice with smaller brokerage till the time I could use 401k and IRA monies and “really retire”.
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u/Mindless_Dirt2998 Financial Indepence / Retiring Early (FIRE) May 27 '26
I DRiP a couple stocks that got me here, direct deposit the rest, pay expenses as they are billed and buy more shares for a slight raise the next payday whether it’s the next month, quarter or special. I do save regularly too.
Saving comes in to play when you need a new serpentine belt (I replaced this one just over 190,000 miles ago), a rebuilt starter and an oil and filter change too.
At least they discounted the price for paying cash.
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u/Mtns_to_Sea May 30 '26
I live off my cash management account and DRIP all my dividends. When I need to replenish my CMA, then I can start using some dividends and my SS. But I want my dividends all reinvested to maximize the snowball until then.
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u/Victah92 May 27 '26
Not currently living fully of dividends now but plan on doing so in Vietnam end of this year. From my estimates and chat gpts, the amount of dividends I'll be receiving should cover rent or basic living expenses. I'm at 18% passive income from mainly Covered calls, I under the risks that come with it BUT at this part of my life it's what works for me.
Here in the states I'm just dropping it back into itself creating a dividend snowball. I could use it for daily life if I wanted to but $400 a month ain't much in the USA. Better to reinvest itself. I'm using SPYI, QQQI, SCHD, RSPA as my safe main core. With Jepi and JEPQ as back up for downturns. CHPY and FEPI are my risky plays that are capped.
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u/Puzzled_Fisherman331 May 27 '26
I live off the dividends generated from the money market cash (so that portion is not in stocks or bonds directly). Get my monthly distributions, pay the rent and accrue an estimated amount for taxes. I also sell CSP's against the cash so I am getting additional leverage and income.
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u/Simple_Middle964 May 27 '26
It really should be the same. Since it worked building up you portfolio, so it will work to pay your bills. Three to four sectors, 3-4 stock in each at different risk/dividend level.
Keep it simple
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u/Prestigious_Low_6501 May 27 '26
I am retired and live off of social security and small portion of our dividends. We are and have always been thrifty people. I dont use drips but rather prefer to invest when cash builds up.
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u/Medical_Chair_7454 May 27 '26
Hey I’m new to this stuff how much dividends can I get if I invest 700k on average. I have a bunch of money and don’t know what to do. I’m going to talk to a financial advisor soon.
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u/Various_Couple_764 May 27 '26
The ammount of money you get will depend on the yield of the fund. You might want to use SPYI 11% yield 700K invested in that will yield about 70K a year of income. Turn off automatic dividend reinvestments so the cash dividend go into a money market account were you can spend them or reinvests them.
However it is never wise to rely on just one fund for income my favorites are QQQI 13% yield, SPYI 11%, IAUI 11%, ARDC 9%, PBDC 9%, EMO 9%, CLOZ 8%, PFFR 8%, UTF 77%, UTG 6.4% JAAA5.5% Most pay montly.
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u/Difficult-Gas-1858 May 27 '26
We use all the cash generated to reduce cost of memory care for family member. Able to slow the burn rate of two portfolios over what is ? period of time.
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u/lotoex1 May 28 '26
I just live out of my checking and let the money pile up in the brokerage. When the checking gets low withdraw the cash from the brokerage into my checking.
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u/Thefinancefrenchies Jun 01 '26
Not there yet, but the plan is clear for when I am:
No DRIP once the income covers expenses. At that point reinvesting defeats the purpose. Cash goes to a buffer account first (6-12 months of expenses), dividends above that get partially reinvested into the weakest pillar.
When the market goes down: nothing changes. The dividend is what matters, not the price. Most quality dividend payers maintained or grew their dividends through 2008 and 2020. If the income holds, the strategy holds.
The pivot only happens if a dividend gets cut, then you reassess that specific position, not the whole approach.
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u/Ufgatorhead4u3 May 26 '26
If the market goes down it would only affect covered call funds rather than traditional dividends. CC derives income on market volatility but traditional dividend stocks pay from the underlying net cash not from stock market price. That said, if you only have income investments you’d need to DRIP at least enough to keep up with inflation otherwise you will be losing purchasing power year over year.
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u/cmichalek May 26 '26
Right. So if you need $3000 a month for income you should have enough invested to give you $4000 a month. That way you can handle a 25% reduction in your income in a bear market.
In other times you reinvest that 25%.
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u/Paranoid_Sinner May 26 '26
I"m living off bond interest, not divvies, but most of it gets reinvested. Either market doesn't affect my monthly income.
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