How Much $ Invested To Live Off Dividends

How much money you need invested to live off dividends and passive income.

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Let's talk about how much money you need invested to live off dividends and generate enough passive income. Investing in the stock market doesn't have to be difficult, in fact, it's really simple! In order to understand the answer to that question, I'll start the video by showing you how much dividends I made last month in November.

Last month I made $26,168 with my dividend portfolio. That’s an insane amount of money. People talk about compound interest, where eventually your money makes you money, and then that money makes money and so on and so forth. This is a perfect example of that happening in real time. At some point, your stocks will reach a level where the compound interest and the growth on it per month is going to be more money than you can earn working a 9 to 5 job. That’s the goal. In addition to that, I made $743.57 in dividend income, and an effective $933 in dividend raises as well. So here’s the breakdown for that.

#1: $743.57 for the month of November in dividend income. But what’s interesting is if I compare that to my last year’s income in November, I only earned $409.58, that represents a growth of 81.5% from last year's November. I’ve consistently made more by just reinvesting my dividends and buying more stocks.

#2 On top of the dividend income, the second source is from dividend increases. This happens when a company takes the profit it’s made and instead of reinvesting back into their own company to make more products, they give us a pay raise. This doesn’t always happen, but I try to find companies that follow that trend. There is a downside to this. #1 I pay more in taxes because dividend income is taxed, even if I reinvest it automatically. The second downside is that the stock usually drops by exactly the same amount as the paid out dividend per share. I received $37 per year extra this month which is roughly the same as investing $933 at 4%.

If you add up my dividend increases which is an effective $933, plus my dividend income which was $743.57 that equals $1676.57. Not bad for a month’s work of doing nothing. But wait, there’s more. On top of my dividend income, I earned interest on digital currencies and this past month I made .04 BTC ($770) which is roughly $770 bringing the actual monthly passive income total to $2446 but unfortunately it’s not dividend related, and it’s not FDIC or SIPC insured so it's a higher risk than my dividend income.

Back to the original question of how much money you need to retire with dividends. To answer that question you first have to figure out what you’re comfortable with living on in terms of an income. For most people, $40,000 to $50,000 can afford them to live virtually anywhere in the world especially with something called geographical arbitrage which is where you go to a different country where the purchasing power of the dollar affords you more stuff. Like for example my city of Astrakhan, which is where I was originally born, where the average monthly net income after taxes is $249 - that’s per month - that equals $3,000 per year. Using what you’ve learned know that in order to make $3k at 4%, you need $75,000.

The reason I love dividend investing is because I can plan for my future by calculating my cash flow vs my debt rather than trying to time selling my stocks in a perfect economy. So the final answer as to how much money you need invested to live off dividends is your yearly desired income divided by a dividend yield that you are comfortable investing in. Using the standard 4%, most people need roughly 1 million dollars invested in dividend stocks to be able to live off of the passive income. If I wanted to make $100,000 a year, that would be 2.5 million. That’s really my ultimate goal. I’d love to hear yours!

*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.