How I plan to retire at 28 using dividend income

dividend income retire earlyRETIRE ON DIVIDEND INCOME


I’m Mr. Captain Cash and yes I have this absurd, unrealistic, or impossible dream by conventional standards of retiring before my 28th birthday on my dividend income.


How do I plan to retire so early?


To retire before my 28th birthday I intend on creating an investment portfolio that will generate $20,000 in annual dividend income covering my annual expenses.

Once my annual dividend income exceeds my annual expenses it will mean I’m financially independent and able to “retire.”

I used quotations around the word retire because I will not retire by conventional standards. To me the word retire or becoming financial independent means I will be able to spend the majority of my time the way I intend to as I am no longer reliant upon my work pay cheque to cover my expenses.

For myself this means not working or only working a couple of days a week when I have kids to watch them grow up or the flexibility to travel for six months. In a nut shell it is to have the freedom to do whatever I want to do each morning I wake up.

I always like to point out that a lot of the activities of I intend on doing in retirement most likely will still generate income. The difference is that I will be able to choose what, when, and how much I want to do these activities.

Before we get into why you need to be interested in dividend income I want to provide a brief overview on what is a dividend and specifically dividend income.


Dividend Income


What Is A Dividend and Dividend Income?

If you’re new to investing your probably wondering what is a dividend or dividend income.

Per Investopedia, a dividend is:

A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

Meaning a portion of the companies’ profits or earnings is being distributed to shareholders. These distributions can be in the form of additional shares, money, or even property. It is a method used to reward shareholders for investing in the company.

There are many ways you can receive dividends from investing. These may include individual dividend paying companies, mutual funds or index funds just to name a few. There is no right or wrong approach, it all depends on what you are comfortable with.

Receiving dividends from your investments is dividend income. My personal investment approach is to invest in dividend paying index funds which last year generated an annual dividend income of $5437.85 or per a five-day work week almost $21/day.

I still have ways to go before I reach financial independence but I’m ecstatic with roughly an extra $5500 a year for doing relatively nothing!


Three Reasons Why You Should Be Interested In Dividend Income!


Sh*T Happens


It is quite possible that right now you love your job or do not share a similar dream of achieving early retirement so why bother creating a passive income stream using dividend income.

From my personal experience anything can happen as one cannot predict what the future holds for your job. Management may shift changing your work environment, your income may become stagnant or even reduced which is cause for significant change for many people.

Alternatively your company may also move operations and require you to relocate to an undesirable city, or worse case you are let go unexpectedly in tough economic times.

To bring the unexpected job loss to light with the recent drop in oil prices I have some coworkers who seemingly had pretty stable jobs a couple of months ago but have recently experienced job losses.

This is all the more reason to find ways to create and maximize potential income unrelated to your full-time job. Which in my case is dividend income.


Time Is Limited


Investing in investments that produce dividend income will give you an alternative way to pay your budgeted expenses. Which as mentioned above once your dividend income exceeds your expenses you are financially independent meaning you can escape the rat race.

Instead of following the typical trajectory of working for 30-40 years you will be able to spend your time however you see fit. I believe this is the most important reason to become interested in dividend income because our time on this planet is the one thing that is limited.




With any investment portfolio there are many ways you can extract income from it to cover your expenses during retirement. Many of you may have heard of the safe withdrawal rate of 4% when it comes to depleting your investment portfolio during retirement.

The problem I have with this method is none of us know what the market performance will be or the next twenty to thirty years in retirement. Meaning the 4% withdrawal rate will continually be required to be adjusted with regards to market performance to ensure we don’t bleed our investment portfolio dry.

Most importantly none of us know when we are going to pop our clogs. This is why I believe you should have an investment portfolio producing enough dividend income to cover your expenses.

This way by living only off of dividend income your asset base will stay in place and hopefully continue to increase in value ensuring that you will not run out of income during retirement.

How do you plan to cover your expenses during retirement?

Does it involve using dividend income? 

Post Contribution: Mr. Captain Cash blogs about the Cash Accumulators journey of winning the FI Cup and reaching financial independence in the next four years by maintaining a savings rate of 80% of his income.


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  1. It would be a huge accomplishment to save a half a million by 28. This is what you would need to generate $20k a year in dividend income.

  2. Good luck to you! That amount of income seems quite low, so I assume you’re a pro at containing your costs. We’re planning to live on roughly double that, and are focused on rental income and the sale of index fund shares to support us. Keep spreading the good word!

  3. My accounts are set up for income generation. There is a mix of Bond and Stock funds. I use the 4% safe withdrawal rate guideline but its not a set and forget withdrawal plan. I will adjust it as needed.

    1. LeisureFreak Tommy,

      That is what I have always said with the “safe” withdrawal rate. Even 3% might not be safe. It all depends upon individual circumstances and market performance. It is great to hear that you have a plan and realize that it may need to be adjusted to ensure you do not run out of money.

      Do you mind sharing your mix of bond and stock funds? like 40% bonds 60% stocks?

      Mr. Captain Cash

  4. Sounds like a great plan!

    We’re focusing on paying off our mortgage right now, so our retirement plan is relying on a government pension. Once we start investing more though, that plan will probably change!

    1. CheapMom,

      Crushing the mortgage balance is always a great idea. Taking full advantage of this low interest rate period will definitely pay dividends when the interest rates rise.

      Good luck along the way and hope you enjoyed the article!

      Mr. Captain Cash

  5. That is crazy, in a good way:

    “To retire before my 28th birthday I intend on creating an investment portfolio that will generate $20,000 in annual dividend income covering my annual expenses.”

    How I am planning to cover “retirement” expenses? Same. Passive income.

    Best wishes on your journey!

    1. Mark,

      Thanks for the compliment and glad to see you enjoyed the article. I have enjoyed following your journey over the last couple of years.

      As usual I’m sure you will keep up the great work throughout 2015.

      Mr. Captain Cash

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