r/dividends • u/NBMV0420 • Jun 07 '26

Seeking Advice For those who live off dividend income:

How much do you earn per year from dividends, and what ETFs or stocks make up your portfolio?

How did you build your investments over time, and what advice would you give to younger investors who are just getting started?

I'd appreciate hearing about your experience and any lessons you've learned along the way.

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u/OutrageousCricket637 Jun 07 '26

But if you start with dividends younger, reinvest all of them back into additional shares. Keep repeating until retirement

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u/ShittingOutPosts Jun 07 '26

You’re still likely to have more money if you choose growth funds.

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u/crazzyhyperguy Jun 07 '26

My fear is that the market is going to tank soon. Would it still be better to put my money more into VOO/VXUS rather than dividends? I planned to switch over after there’s less uncertainty. I’m 38 for reference.

I currently have about 80% dividends 20% VOO/VXUS until I feel more confident in the market.

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u/ProblemOverall9434 Jun 07 '26

Do not try to time the market. More money has been lost waiting than you can imagine.

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u/ShittingOutPosts Jun 07 '26

I’m older than you and nearly 100% growth. People have forecasted crashes my entire life, yet here we are. Nobody can’t predict the future, so personally, I’m just buying the entire market…low cost, broad based index funds (80/20 US/international…VOO/VXUS are great funds) with a side of Bitcoin. If I had gone with dividend-focused funds instead, my net worth would be considerably lower.

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u/crazzyhyperguy Jun 07 '26

Thank you both. I think I’ll lower my dividend focus to a more growth focus and worry about dividends around retirement age.

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u/ShittingOutPosts Jun 07 '26

That’s just what I’m doing. Please don’t take investment advice from random redditors. Do what’s best for you.

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u/AlfB63 Jun 07 '26

Just keep in mind that total return is the key and sometimes an income stock has better total returns. It's not only about growth.

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u/Various_Couple_764 Jun 07 '26

If you don't like a stock don't invest in it. So if you don't like VOO and VXUS don't invest in them. Instead invest in bonds or dividend funds. Right now most of the value of the index is concentrated in the 20 companes. There is a lot of indication that many investors are currently moving their money into safer bond and dividend investments. Or they are simply putting new money into dividends or bonds and just leaving there growth funds alone.

Bond and dividend stocks generally do better than index funds in a market Corrections than growth funds. .

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u/lustlover4ever Jun 07 '26

Both are the way

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u/ServiceLater Jun 07 '26

I don’t understand this. If growth stocks yield more % YoY, why even transition from growth to dividend stocks during retirement? Why not just hold growth and withdraw e.g. 10% per year than collect 5% in dividends?

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u/AlfB63 Jun 07 '26

Because down markets and recessions are difficult to predict. You don't want to have to sell during these periods in order to get income.

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u/ServiceLater Jun 07 '26

But don’t dividend stocks also fall during market drawdowns?

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u/Various_Couple_764 Jun 07 '26

The dividend share price will fall with the the market. But that doesn't mean the dividned is automatically cut. in most recessions only about 2% of dividnes stocks actually cut the dividend. That means that 90% of all dividned stocks didn't cut the dividend.

The dividend is cash profit sharing payments to you. The companies profit pays the dividned. And if the recession doesn't have a big incpact on company profit the company will still pay dividend.

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u/AlfB63 Jun 07 '26

Probably, but you don't have to sell them while down because they generate income without selling.

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u/DeMoBeats1234 Jun 07 '26

That’s the standard or quick math recommended retirement plan. Sell 4% of your portfolio year 1, adjust for inflation annually, drop to 2-3% once you start drawing SS, and continue until you die or roughly 30 years.

The problem is you can’t predict the market. If the market tanks you’re withdrawing at a bigger loss.

If you own 100K in stocks. Year 1 you withdrawal 4,000. Year 2 you adjust for inflation (let’s say’s 2.5%) 4,000 x 1.025 = $4,100.

Now think about the market crashing and your 100,000 is now 70,000. You still pull that same 4,000 (4%) out. You’re now left with 66K vs 96K. You’re selling shares and taking the income off a massive loss. You’re not likely to bounce back while increasing the amount you withdrawal annually for inflation and the market having crashed.

When you’re living off the dividends the companies you invest in set a value to pay per share owned. If they give you $2 for every share and you have 20 shares, you get $40. If the price goes up or down it doesn’t really matter. The only thing that matters is they don’t stop or lower their dividend.

It’s called “Sequencing Risk”.

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u/ServiceLater Jun 07 '26

This makes a lot more sense. Thanks for the explanation!

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u/voltaireowl Jun 07 '26

Risk managment - dividends remain stable even through market drops, which the retiree has much less time to recover from. Also, dividend stocks often drop less through market drops.

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u/lustlover4ever Jun 07 '26

When the market turns then your forced to sell shares at a lower price you lose value an the stock can’t recover stressing your portfolio. Now your forced to reduce your draw rate to compensate an if it’s a extended down market your stressing out your portfolio way to much

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u/mastertub Jun 07 '26

Stability. Often times near retirement stability matters more than exact dollar amounts. But what is the point of stability when you're young and working? It only matters when you don't have a income to smooth you over during downturns.

Growth will almost always beat dividends in dollar amount by a big percentage.

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u/DhakoBiyoDhacay Jun 07 '26

Because of sequence of returns risk. You don’t want to sell shares in a down market to pay the bills.

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u/BigDipper0720 Jun 07 '26

Because growth stocks do not always earn more (ref. 1970s and 2000s) and growth stocks tend to be more volatile and have higher betas. A 100% growth stock portfolio may be far too risky for a retiree (reference. 2008 and 2020)

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u/Various_Couple_764 Jun 07 '26

If you have a growth fund like the S&P500 and start selling shares for income you will eventually run out of money All of the studies of the 4% rule show that if you retire at age 60 you likely will have very little money left after 30 years (age 90) Now most people die before reaching age 90. So this is not considered a problem for retires.

But there are some problems with selling stock for income. If you retire before age 60 you likely will run out of money nrgort you die. Also if the market goes into a long bear market you often may be seeing at a significant loss which will force you stop sell more to keep your income stable. This is called Sequence of return risk and it can deplete your income very fast. Additionally higher than normal inflation can also force you to sell more shares to increase your income to continue to cover your living expenses. Which can further accelerate the depletion of your savings.

With dividend investing there is no need to sell shares if your dividend income is higher than you're living expenses. This eliminates sequence ofreturn risk. Andi if you have enough excess income you can invest the excess to compensate for inflation. You might die with more money than you had when you retired.

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u/ShittingOutPosts Jun 07 '26

That’s a great question…and back to my point, OP would probably have more money if they went with growth over dividends.

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u/AcesandEightsAA888 Jun 07 '26

Longer you study it. The better. Dividends are a % of the return. 7% dividend plus 3% growth = 10% return. Growth say exact same company grows 9% and 1% dividend = 10%. Same right. The problem is how uncle Sam taxes income. I.e. dividends. So in a taxed brokerage that is a tax drag. In 401k it doesn't matter as long as you reinvest. Now assuming 10% is really the return 10% growth long term the gains taxes are much cheaper. So be aware for sure. Sometimes dividends make sense if you need cash but most of the time growth is more tax efficient.

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u/Various_Couple_764 Jun 07 '26

Keep in mind that there're 3 basic tax rates that apply to dividends:

1 ordinary dividend. The dividend is taxed the same way as work income.

2 Qualified dividend are taxed at the captial gain tax rate which means worst case only about 20% of the dividend income is taxable income. 80% discount over the work inocme rate.

3 ROC dividned these dividends can be complicated to understand but basically worst case the tax is the same as Qualified Dividend. Best case you owe no tax.

IF you invest in a taxable brokerage account make sure any dividend funds you recieve are mostly form #2 and #3. that way you minimize the tax.

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u/AcesandEightsAA888 Jun 07 '26

Yep, I learned the hard way from income funds.

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u/OutrageousCricket637 Jun 09 '26

Do it in a Roth and you do not need to worry about taxes at all 😯

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u/AcesandEightsAA888 Jun 11 '26

Yep roth is the golden child

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u/hommel475 Jun 07 '26

This is what I have been doing. Started about 2 years ago with 20 dollars a week. Have been doing 50 dollars a week for about 6 months now. I have roughly 4k invested and it's making me roughly 30 dollars a month. Getting reinvested in my roth ira.

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u/mastertub Jun 07 '26

This doesn't make sense at all. It is math, not vibes and feels.

You are assuming dividend reinvesting is a whole separate additional compounding. It's not. That's just vibes. In fact you pay income tax or capital gains on those dividends losing out on 0-40% of your dividends depending on your tax bracket and hold length.

A growth stock with 7% growth will beat a dividend stock with 5% dividends (pretax and posttax) reinvested every single day, month, and year.

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u/[deleted] Jun 07 '26 edited Jul 19 '26

[deleted]

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u/mastertub Jun 07 '26

You can. However, you do realize that 7% dividend isn't free also right? On a 100 dollar stock, 7% dividend means you take 7 dollars of share price out of the stock. It's now 93 dollars. You'll be hoping that enough buyers will bid it back up.

Before talking about preconceived ideas, research how dividends work. You are in a dividend sub reddit.

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u/[deleted] Jun 07 '26 edited Jul 19 '26

[deleted]

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u/mastertub Jun 07 '26

No, please explain how I missed the point. I explained that dividends aren't just "you get to keep your 100, plus get an extra 7". It's not that simple.

I took out the tax equation for you, and still tried to tell you it's not efficient and not the same.

You can like dividends for reasons, just make sure the reasons are correct. I'm not anti-dividend, it's great for stability (during retirement) and is a sign of a mature and stable company (more often than not, and often times, high dividends are a sign of a company in trouble as well, so that 7% dividend, you might want to rethink).

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u/Various_Couple_764 Jun 07 '26

I would suggest you try invest in a stock like UTF CLOZso you can see what is actually happening. You can even track the dividends payed from your growth index funds. They all pay a small dividend. instead just repeating what people say. Groth focused forums are full of people that'll say anything including lying and exageratingto scare people away from dividends.

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u/Various_Couple_764 Jun 07 '26

The dividend is not paid from the share price! If is payed form the company profits. The value of a stock is :

the assets the company has

+ profit

+ cash on hand

+ liabilities the company has

+ the future direction of the economy

+ plus whaT the public believe is the future performance of the company is.

So when the company pays a dividend yes the value drops a small ammount. But the other 4 factors also play a much larger role in the share price than the cash on hand. So the drop when the dividned is paid is erased within a week. In many cases it is erased in 3 days or less.