- November 14, 2022
- Posted by: Karl B
- Categories: Dividends, Trading Article
This is a huge question I get all the time…
How much money do I need to live off dividends?
The answer is… It depends.
I hate those kinds of answers… So let me unpack this a little bit.
I Don’t Know How Much
First – let me state the obvious – YES you can live off dividends. Many many people survive by collecting dividends from their stock portfolio and only spending that money. So, yes, it’s not only possible to live off dividends but you absolutely can do it… I’ll show you how in a moment.
But, why can’t I give you a solid answer of how much you need to save?
Most people just want a number… Save $300,000… Save $500,000… Save $1 million dollars!
I’ll give you a number…
The median income in the United States Median household income was $67,521 in 2020… that means 50% of the population makes more and 50% makes less.
To replace that median income for the next 20 years (not factoring in inflation) , you need to save $1,350,420.00
BUT WAIT… that $1,350,420.00 might not be right for you… it might be WAY WAY HIGH… (It assumes a lot of things).
How much do you really need to save?
To Determine How Much Money You Need To Save For Retirement…
Here are some things to consider…
What are your expenses?
Have you paid off your mortgage?
Do you plan to travel a lot in retirement?
Are you expecting out of the ordinary medical expenses as you age?
These are all questions you need to ask yourself about your expenses. The more you know what your expenses look like… the better able to calculate your needed Nest Egg!
It goes without saying, the less you spend, the smaller your nest egg can be.
But that’s not all.
Here’s a few more things to consider…
What other income do you have?
Are you working part time in retirement?
Will you collect Social Security? (Here’s my thoughts on Social Security)
Do you get a pension?
This helps calculate the income side of things… Obviously, if you have stable income from other sources, it means you don’t need to save as much.
There’s still more to consider.
Do you have other types of Debt to pay off?
Are you leaving money to the kids or grandkids?
Are you supporting a kid in college still?
Are your parents financially stable?
Are you supporting any charities who you want to give money?
Do you need to keep the principal, or can you spend it down?
These are all huge questions that will impact your savings levels and the amount of money you need in a nest egg.
For example, are you planning on spending your last penny as you slide into the grave? Then your nest egg needs to look very different from someone who hopes to pass along money to their kids.
Look, everyone is different. The amount of money you need to save for retirement is different. But the questions you need to be asking yourself are the same.
Did You Know?
I’m not sure if you know this… but I put together a Special Report: What’s Your Number: How much do you really need to retire?
It’s free for paid up subscribers to my Dividend Tree Newsletter.
In this Special Report I break down in detail each of the steps you need to take to seriously calculate your retirement needs.
It’s a workbook style report walking you step by step through everything you need to think about in retirement.
We cover costs – and how to reduce them. Income and how to increase it. How to calculate social security… the value of pensions… PLUS we factor in the bigger questions.. Like how much you want to leave to the kids (if anything at all!).
If you really want to know how much you need to retire… This workbook does it all for you.
You can get this Special Report free, when you subscribe to my Dividend Tree Newsletter.
Click here – to finally answer the question… How much money do you need to retire?