5 ms·

How much money do you have to have in index funds to live comfortably off dividends? Isn't it an astronomical amount? I have ~$100K in index funds and i'm makin

How much money do you have to have in index funds to live comfortably off dividends? Isn't it an astronomical amount? I have ~$100K in index funds and i'm making about $100 (if even that)/month right now which just gets reinvested. You'd have to have at least half a mil to get any kind of serious money out of this.

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tome 9y ago
You can safely draw down 4% per year according to fairly conservative calculations of MMM. http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need... It sounds like you're making 1.2% in dividends, but you can (by this calculation) also sell 2.8% of your investments whilst keeping your total pot above inflation.
tonyedgecombe 9y ago
Are you paying a lot in fees? I would have expected a better return than that.
- avenoir 9y ago
  Very possible since this is a managed account. I am terrified of doing anything in the stock market, unfortunately.
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TACIXAT 9y ago
The general rule that people use is the 4% rule. If you take your comfortable living amount and divide by 0.04, you will get a rough estimate on how much you will need to retire. This is based off of market returns, primarily invested in index funds. If 40k / year was comfortable, then the target would be 1,000,000.
mywittyname 9y ago
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0623 https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... Yields 2.99% - 0.15% for expenses. So you'd need roughly 34 times spending to get by on dividends alone.
- devinj 9y ago
  SEC yield already includes expenses, so it's just 2.99%. (The actual dividend yield is 3.08%. I don't know where the other .06% comes from, but IANAA).
msmart 9y ago
It depends on the withdrawal rate. See https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study. Accordingly, you can withdraw more that the 100$ dividends you are getting without reducing the inflation adjusted value of your funds.
astura 9y ago
You also should "count" capital gains as well as dividends since dividends offset capital gains.

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tome 9y ago

You can safely draw down 4% per year according to fairly conservative calculations of MMM. http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need... It sounds like you're making 1.2% in dividends, but you can (by this calculation) also sell 2.8% of your investments whilst keeping your total pot above inflation.

tonyedgecombe 9y ago

Are you paying a lot in fees? I would have expected a better return than that.

avenoir 9y ago
Very possible since this is a managed account. I am terrified of doing anything in the stock market, unfortunately.
- deleted 9y ago
  [deleted]

TACIXAT 9y ago

The general rule that people use is the 4% rule. If you take your comfortable living amount and divide by 0.04, you will get a rough estimate on how much you will need to retire. This is based off of market returns, primarily invested in index funds. If 40k / year was comfortable, then the target would be 1,000,000.

mywittyname 9y ago

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0623 https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I... Yields 2.99% - 0.15% for expenses. So you'd need roughly 34 times spending to get by on dividends alone.

devinj 9y ago
SEC yield already includes expenses, so it's just 2.99%. (The actual dividend yield is 3.08%. I don't know where the other .06% comes from, but IANAA).

msmart 9y ago

It depends on the withdrawal rate. See https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study. Accordingly, you can withdraw more that the 100$ dividends you are getting without reducing the inflation adjusted value of your funds.

astura 9y ago

You also should "count" capital gains as well as dividends since dividends offset capital gains.