Millions of Americans dream of early retirement, but it’s becoming harder to exit the workforce amid rising costs and a lack of savings. A national survey shows that about 55% of Generation X – individuals aged between 44 and 59 – feel they won’t be able to financially prepare for retirement.
However, with planning, consistent savings and wise investments, one can retire early and gain control of their time.
In January this year, someone asked on Reddit’s r/Dividends community of over 600,000 members whether anyone was living entirely off dividends, what it’s like to live such a life and how they spend their time.
The poll received hundreds of comments, with many interesting success stories and insights.
A Redditor said he was living solely off dividends with his wife. He, 42, retired in March 2022 while his wife, 47, retired in August 2021. The investor said he was earning about $74,824 per year in dividends.
“We travel the world full time. Utilizing the standard 90 days most countries allow on a tourist visa and then move on to the next country. We are currently in Porto, Portugal and have been here since November 30. We head to Montenegro next for three months,” he said.
The investor was asked how he was able to accumulate wealth for his initial investment. He said that he and his wife had careers in finance.
“We worked in finance for our careers. I started at a local credit union right out of high school and worked for a total of two credit unions and five banks during my career and my wife worked at three banks during her career. We always lived pretty frugal, maxed out Roths since 2002 and maxed out our 401(k)s since 2005.”
He said he and his wife were “fairly aggressive” in adding to their taxable brokerages. According to the investor, he did not make a “ton of money” when compared to his friends.
“My best year was my final year, 2021 and I made $85,000. Her best year was just under $100,000, but that was in 2013. From 2016 on, she had two 1-year gaps of employment and then only made around $48,000 and the final two years of employment were $66,000 for her in 2020 and 2021.”
Portfolio Breakdown
The retired investor gave a nice breakdown of his total assets and investments. He said about 8.92% of his total net worth was in fixed income (CDs and T-Bills), while 91.08% was invested in stocks. Of these, 52.86% was in ETFs, while the rest was in individual stocks. He said the total worth of his portfolio was about $2.03 million as of January 30.
During the discussion, the investor shared the names of the dividend ETFs he was invested in. Let’s examine these.
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Schwab U.S. Dividend Equity ETF
Portfolio Weightage: 31.923%
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) was the biggest holding in the investor’s portfolio that generated $74,800 per year in dividends. The fund accounted for about 32% of the total portfolio. The ETF tracks the Dow Jones U.S. Dividend 100 Index and provides exposure to some of the top dividend stocks trading in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie. Since SCHD’s holdings are mostly conservative dividend payers, it’s suitable for investors close to retirement looking for consistent dividend income.
Vanguard Real Estate ETF
Portfolio Weightage: 5.009%
The Vanguard Real Estate ETF accounted for about 5% of the total portfolio. VNQ invests in REITs and has a dividend yield of about 3.9%. It pays quarterly. Some of the biggest holdings in the fund’s portfolio include Prologis, American Tower, Equinix, WellTower, Digital Realty and Simon Property, among many others. VNQ is up 7.5% so far this year.
Vanguard Total Stock Market ETF
Portfolio Weightage: 6.052%
Vanguard Total Stock Market Index Fund ETF (NYSE:VTI) was the investor’s third biggest holding. It made up about 6.05% of the total portfolio. VTI tracks the total stock market, exposing investors to small-, mid- and large-cap stocks. About 69% of the fund is allocated to large-cap stocks. Its portfolio includes more than 3,600 stocks. Among the top holdings of the ETF are Apple, Microsoft, Nvidia, Meta Platforms and Amazon. VTI has a dividend yield of about 1.3%.
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Vanguard S&P 500 ETF
Portfolio Weightage: 6.173%
The Vanguard S&P 500 ETF (NYSE:VOO) accounted for about 6.2% of the total portfolio. VOO exposes investors to the top 500 U.S. stocks from the technology, consumer discretionary, staples, energy, health care and materials sectors. Microsoft, Alphabet, Berkshire Hathaway, Broadcom, Nvidia, Meta Platforms and Apple are among the fund’s top holdings.
VOO has a dividend yield of 1.3% and pays quarterly.
SPDR Portfolio S&P 500 High Dividend ETF
Portfolio Weightage: 3.611%
The investor who shared his portfolio details, claiming to be earning over $74,800 per year in dividends, said that about 3.61% of his portfolio is allocated to the SPDR Portfolio S&P 500 High Dividend ETF (NYSE:SPYD). The fund yields over 4% and tracks the total return performance of the S&P 500 High Dividend Index. Some of the top holdings of the fund include Kellanova, Public Storage, Hasbro and Simon Property, among others.
Strive 500 ETF (STRV)
Portfolio Weightage: 0.084%
Strive 500 ETF (STRV) provides investors with exposure to 500 of the biggest U.S. stocks by market cap. The fund tracks the Bloomberg U.S. Large Cap Index and has a dividend yield of about 1.2%. Apple, Nvidia, Microsoft, Amazon, Meta Platforms, Tesla and Alphabet are among the fund’s biggest holdings. STRV is up 29% so far this year.
JPMorgan Equity Premium Income ETF (JEPQ)
Portfolio Weightage: 0.006%
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) is a high-yield covered call ETF that distributes monthly dividend income. The ETF invests in Nasdaq companies and generates extra income by selling call options. JEPQ has a dividend yield of just over 9%.
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This article 42-Year-Old Living Entirely Off Dividends Earning $74,800 Shares His Top 7 ETF Picks – ‘We Travel The World Full Time’ originally appeared on Benzinga.com
