How to Retire Early and Live Off Dividends

Is it possible to live off dividends in retirement?

Can you retire by 40 with dividend stocks & ETFs?

These are the 2 questions I found myself asking when I began my journey towards financial freedom through dividend investing.

It seems pretty cool, right?

Just sit back and collect dividends check while all your friends and colleagues continue busting their butts for the MAN!

You can reach financial freedom decades before the masses and do whatever you want.

I already achieved a semi-retirement by using geographical arbitrage and moving from the USA to a lower cost of living country in Asia.

But what if you want to live anywhere in the world through dividends?

That’s when I researching all the best bloggers & Youtubers who achieved this exact same goal.

Live Off Dividends in Early Retirement!

Now, I haven’t done this myself so I’m going to highlight 3 different investing bloggers who reached early retirement using the power of dividends.

We’ll talk about each blogger, what strategies they used and how you can achieve the same results.

At the end of this article, I’ll outline a simple to follow step by step guide on how you can live off dividends in retirement too!

3 Guys Who Retired Before 40 Off of Dividends

Mr Money Mustache

Mr Money Mustache is arguably the godfather of living off dividends in retirement. He’s one of the first FIRE bloggers to talk about frugal living and early retirement by 30.

He retired at 30 using Vanguard index funds that pay him dividends. Right now, he is current living off dividend income and some side hustle earnings from his blog.

His story is especially unique because he is extremely frugal, doesn’t own a car, lives in an affordable house in America yet he’s a legit millionaire.

He was married at the time he retired but is now divorced with a young son. Still, he remains frugal post-divorce and continues to preach a lifestyle of living below your means while investing your surplus income in assets that pay you money.

Powerful stuff folks!


MrFreeat33 is probably my favorite FIRE blogger. His honesty and transparency is unmatched in the investing bloosphere. Retiring in just 5 years is an incredible feat. It proves its never too late to get your sh*t together!

Jason Fieber is another inspirational FIRE bloggers who retired at 33 from his boring job at an auto dealership. What makes his story extremely unique is that he went from broke to retired in just 5 years using dividend growth investing.

Jason lives off his dividend growth stock portfolio income in Thailand along with his Thai girlfriend. He chose to relocate outside of America and become a dividend expat to stretch his money further.

This is my current strategy now and I think it’s great for younger millenials who want to reduce their cost of living while traveling at the same time.

Root of Good

RootofGood is another interesting FIRE blogger who retired at 31 with a wife and 3 kids after he was laid off from work.

He preaches investing in index funds and living off Vanguard index fund dividends in early retirement. He is also extremely frugal and tracks every penny spent on his blog monthly.

While Mr. Root of good is retired, his wife still works full time but they are multi-millionaires anyways thanks to his low expenses and sound index fund strategies.

What Do These 3 Early Retirees Have in Common?

I’ve been following each of their blogs for almost 1 year and I noticed a few very important similarties between these guys. 

The reason I chose these 3 is because they all come from different backgrounds, have different family sizes, and word different careers.

Despsite all of their differeneces, they achieved the same goal of early retirement in their 30’s.

What is the secret to their success? How do they live off dividends in retirement?

1. They Invest in Dividend Paying Stocks & Index Funds

All 3 bloggers recommend investing in dividend stocks & index funds as the main way to create passive income for expenses during retirement.

For most people, index funds is the easiest and best strategy if you don’t have time to reach stocks. I wrote an article about building a dividend growth stock portfolio if you want to learn more about dividend stocks.

Index funds are low cost (I recommend low cost Fidelity index funds) and they allow you to own the ENTIRE stock market instead of individual companies. As long as the stock market does well in the future, you’re set to go.

Dividend stocks will give you the largest gains but they carry the most risk. Going with index funds is the best strategy for most people and don’t require much thought or effort.

Start with the Fidelity Zero Total Stock Market Fund (FZROX). It’s a zero fee fund and tracks the entire U.S. stock market (small, mid and large cap stocks).

You can add adittional funds to diversify your portfolio like a real estate index fund, bond index fund, international stocks fund, etc.

Keep adding money until your dividends exceed your expenses. Add other low cost index funds like a bond fund as you get closer to retirement to reduce your risk.

2. They practice a frugal lifestyle and live below their means

The difference between frugality and excessive consumption is striking. I remember a powerful post written by Retirebeforedad that talks about “all that clutter used to be money”.

In the article, he refers to clutter as things we accumulate over the years. Clothing, shoes, gadgets, toys and anything you can buy in store or online.

Overconsumption strains our wallets and clutters our living space. 

A better strategy is frugality. Frugality means spending less than you earn and living below your means.

Avoid lifestyle inflation as your income increases makes it easier for you to invest in dividend paying assets and retire early.

Living below your means requires you to control your emotions and respect your time & wellbeing.

I noticed a common trait between people who struggle financially and those who live paycheck to paycheck. 

They are horrible at controlling their emotions. They easily give in to their feelings and act before they think.

Ladies and gentlemen, this is a recipe for financial disaster.

If you cannot get a hold of your emotions, don’t try to live off dividends in retirement.

Get control of yourself first. Let go off your emotions and think twice before you act once.

How is this connected to personal finance?

Because excessive consumption is a symptom of poor emotional control. You cannot say no to things you don’t need and cannot afford.

All of these FIRE bloggers do an extraordinary job of controlling their spending and reaching retirement before 40.

Say goodbye to retirement by 65.

It’s the 21st century. Get control of yourself and you can retire by 30, 35 or 40!

3. They Track Their Spending

Pick a random person on the street and ask them this question:

How much do you make per month?

Almost everyone can answer that question with an exact number.

Now, ask them the same question:

How much do you spend per month?

Suddenly, most people have no idea how much they spend. Very few could give you an exact number off the top of their head.

Ladies and gentlemen, this phenomenon is what separates early retirees from the average joe.

They know exactly how much they earn AND spend every month.

When I struggled with money, I had no clue how much I spent each month. 

So I started tracking all my expenses using a free personal finance software called Mint.

It was an eye opening experience.

Create a free account and add all your checking, savings & credit card accounts on the app.

You can track your daily spending & cashflow automatically once everything is setup.

What gets measured gets improved.

All these FIRE bloggers know how much they spend every month & every year. They usually list monthly expense reviews or post their annual spending at the end of each year.

Start tracking your spending and know how much you give away every month.

You will be in for a shocking surprise just like I was!

What You Can Learn From These Bloggers to Live Off Dividends In Retirement

Summing everything up, you’ll need to invest in dividend paying assets, live below your means and track your spending.

Once you achieve these 3 simple steps, you are ready to live off dividends in retirement.

The cool thing about dividends is that they are extremely tax friendly for retirees. Qualified dividends are tax free for individuals earning less than $40,000 per year. You can basically live off your dividends without paying a dime in taxes if you live frugally and spend less than you earn.

Best of all, most dividend index funds own dividend growth stocks that increase the dividend annually. So your dividend income grows along with inflation.

The size of your dividend portfolio depends on your annual income needs. If you can live off of $40,000 or less per year that will keep your dividends tax free.

Most FIRE bloggers try to spend no more than $40,000 per year because of the tax benefits.

That’s $3,333 per month folks. If you’re spending more than that, perhaps you are suffering from lifestyle infation. In that case, your dividends will be taxed at a higher tax bracket.

Keep lifestyle inflation in check. Don’t try to keep up with the joneses because they are broke anyway!

Think about your Ideal Retirement Destination

RootofGood and MrMoneyMustache both reside in the USA while MrFreeat33 lives in Thailand.

Moving abroad saves a lot of money because the cost of living in most foreign countries is much cheaper than America.

You can live off your dividend income in countries like Panama, Costa Rica, Mexico, Thailand, or Philippines even if you’re only bringing in $1,000 per month in dividend income.

Consider geographical arbitrage as a realistic retirement goal.

Western countries are expensive.

Emerging countries are cheaper with a younger population.

It’s possible to not only retire early abroad but find love and potentially start a family, too.

Keep your options open if you’re single. Consider moving abroad to lower your expenses and enter the international dating market where the odds are in your favor (if you’re a male).

What’s the Best Way to Receive Dividends?

Simply turn off your DRIP plan and have the dividends distributed to your core investment account.

Transfer your dividend income each month into a checking account and pay your bills.

As long as you don’t have to touch my portfolio, you’re good.

If you find yourself coming up short then take a look at your expenses. Track your spending every month. 

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