Here's Exactly How Many ETF Shares You'd Need to Replace Your Salary With Dividends
Key PointsThe average American currently makes about $65,000 each year.
Calculating the number of exchange-traded fund (ETF) shares required to replace an individual's salary with dividend income is a straightforward process. To illustrate, we'll use the median American salary of $65,000 as a baseline. The formula is simple: divide the desired income target by the fund's current yield, then divide that result by the current share price. This calculation reveals the total number of shares an individual would need to own to achieve their salary replacement goal through dividends alone.
For a more tangible understanding, let's apply this formula to two of the most popular dividend ETFs available: the Vanguard High Dividend Yield ETF (VYM) and the Schwab U.S. Dividend Equity ETF (SCHD). By doing so, we can observe how the yield of each fund influences the number of shares needed. This information is crucial for investors seeking to harness the power of dividend income to subsidize their living expenses.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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