Calculator · Dividends

Dividend income calculator

Enter the yearly income you want, the portfolio's dividend yield and a tax rate to see the portfolio it takes. Add what you already hold to see what it pays now and the gap left to close.

Your numbers

Portfolio needed

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Gross dividends needed

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Your portfolio pays

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Gap to close

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The working

    The sum behind it

    The portfolio you need is the yearly income divided by the yield. Taxes come first: to keep a set amount after tax, divide it by one minus the tax rate to get the dividends the portfolio has to pay before tax, then divide that by the yield. Forty thousand dollars a year at a 4% yield takes a million dollars before tax; with a 15% tax on the dividends it takes about $1,176,471. How much you need to live off dividends works through the same sum and the risks around it.

    Yield, growth and the inflation check

    A higher yield shrinks the portfolio needed, which makes it tempting to reach for one. The trade-off is safety of the payment: a very high yield is often a sign the market doubts the dividend. The inflation line shows the other problem, since an income that stays flat buys less every year. Growth in the dividend is what closes that gap, a point argued in a growing dividend can overtake a higher starting yield.

    For the tax side, how dividends are taxed covers qualified and ordinary dividends, and the dividend income course goes from how a payment reaches you to building the portfolio.

    Questions about this calculator

    What yield should I use?

    The yield of the whole portfolio you would actually hold: total annual dividends divided by total value. A few high-yield holdings raise it, but a portfolio built only for yield carries a higher chance of dividend cuts, which the result does not show.

    Which tax rate applies?

    Qualified dividends in a taxable account are taxed at long-term capital gains rates, and ordinary dividends at income tax rates; inside an IRA or 401(k) there is no yearly tax on them. A single blended rate is a simplification of that. Situations differ.

    Does it allow for inflation?

    The inflation input shows what the same income would need to be in a later year to buy the same amount. Keeping up with it takes dividends that grow, which is why dividend growth matters as much as the starting yield.

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