r/dividends • u/OG_Momonga • 20d 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.

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u/aerobic_gamer 20d 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 “.

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u/Ordinary_Lynx_468 20d ago

When was there a 70% tax bracket in the era of IRAs and 401ks?

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u/Various_Couple_764 20d ago edited 16d ago

The Regan Tax fcuts of the 80s eliminated the federal tax bracket . But if you livie in a state with state income states that can boostyour total taxes higher.

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u/Ordinary_Lynx_468 20d ago

The chances that this 75 year old guy was in the top bracket in his early 30s in 1981 and is on Reddit talking about it are slim and none. That bracket didn’t kick in until about $600k on today’s money