Comment by avenoir
9 years ago
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 $100 (if even that)/month right now which just gets reinvested. You'd have to have at least half a mil to get any kind of serious money out of this.
You can safely draw down 4% per year according to fairly conservative calculations of MMM.
http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need...
It sounds like you're making 1.2% in dividends, but you can (by this calculation) also sell 2.8% of your investments whilst keeping your total pot above inflation.
It depends on the withdrawal rate. See https://en.wikipedia.org/wiki/Trinity_study. Accordingly, you can withdraw more that the 100$ dividends you are getting without reducing the inflation adjusted value of your funds.
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.
Are you paying a lot in fees? I would have expected a better return than that.
Very possible since this is a managed account. I am terrified of doing anything in the stock market, unfortunately.
You also should "count" capital gains as well as dividends since dividends offset capital gains.
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.
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).