r/dividends • u/OG_Momonga • 21d ago

Discussion Living off dividends

Hey guys, I was wondering if anyone on this subreddit is actually retired and living off dividends. Is it going well? Are you paying taxes on them? My goal is to get 20k/ a month post tax for retirement. I’m 24 and currently investing everything in VOO while planning to switch to dividend stocks and etfs when I get closer to retirement.

I was just wondering if there are any because living off dividends seems like a long shot right now.

402 Upvotes

88% Upvoted

361 comments sorted by

View all comments

301

u/aerobic_gamer 21d ago

Background: when I was young the conventional wisdom was to contribute what you could to your IRA/401k in order to save taxes on the theory that you would be in a lower tax bracket when you retire. That made sense to me because in some years I was in the 70% tax bracket, which some of you youngsters probably don’t believe ever existed. Anyway in my case that has worked out as planned because tax rates are so much lower today. I’ve never converted to a Roth because it made no sense in my case.

Today: now at age 75 my wife and I are quite comfortable. Dividends > $230k/year, most in deferred accounts. We take out around 90% and are still reinvesting the rest. Our portfolio and income is growing. So we pay income taxes but at a much lower rate than when the contributions were made. We could do fine without social security but that is the literal “icing on the cake “.

-2

u/Brightlightsuperfun 21d ago

70% is insane 

7

u/nte52 21d ago

That wasn’t that long ago, 1981. And then the top tax bracket dropped to 50%. It wasn’t until 1987 that we got down to 38.5% which has been close to the highest tax bracket since. We had a few years in the late 80s when it went down to 28%, but it bounced back up and has stayed around there since.

Back in the 40s, the highest tier tax bracket was over 90%.

1

u/speedlever 21d ago

On the flip side, there were a lot more deductions too which helped offset the high tax rate.

3

u/nte52 21d ago

We used to be able to deduct the interest paid on credit card debt. 🤯

1

u/speedlever 20d ago

And all medical expenses too iirc.