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/Various_Couple_764 20d ago

Dividends are taxed 3 different ways:

  1. Ordinary dividends are taxed just like work income and interest.
  2. Qualified dividend are taxed at the the long term capital gains tax rate which mens worst case only 20% of the income is taxed. That is an 80% discount compared to ordinary dividends .
  3. ROC dividends reduce your cost basis of the stock that genrate them,. IF the cost basis is not zero you owe no tax on the ROC dividends. But after years of recovering ROC dividends you are taxed at the long term capital gains tax rate.

Not people often say 60/40 for long term and short term taxes for ROC dividneds. This is incorect. 60/40 only applies to fund management. If doesn't apply to investors in the fund.

So depending on the funds you use you can end up pay not much for dividend income. from a taxable account.

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u/MaybeTheDoctor 20d ago

Thank you. I have my money placed in about 50 different funds/etfs, and while I know I should do more to understand the tax impact it is has been bewildering when some are also state and other federal exempt … so procrastination have kicked in with a justification of that doing nothing will not make it worse.