馃攳
Earn $100,000 Per Year in Dividend Income - How Much Do You Need To Invest? 馃搱馃挵 - YouTube
Channel: Money and Life TV
[0]
going from zero all the way to a hundred
thousand dollars a year in dividend
[5]
income! how do you do it how much do we
need to invest that's what we're gonna
[10]
talk about in today's video my name is
Mike the CPA I hope you're having a
[14]
beautiful day wherever you're at out
there my wife happened to step out of
[18]
the house so you know what they say when
the cat's away the mouse will play on
[23]
YouTube I got my drink handy make sure
you have your drink in hand got my
[28]
Mike's Hard Lemonade thank you to my
friend Sarah for this let's talk about
[34]
dividend investing cheers everybody all
right so why would I hope to accomplish
[37]
with you guys is give you a way to
approach this question for yourself if
[42]
you're looking to make $100,000 in
dividends someday I think you're gonna
[45]
have a pretty good idea when you walk
away from this video of how much you
[49]
personally might need to invest that
answer by the way of how much do I need
[54]
to invest it's gonna be different for
every single person watching this and so
[58]
that is why I'm gonna give you an easy
method you can use the calculator let's
[63]
talk about some of the variables first
cuz that's where this all begins first
[66]
of all we know that the earlier you
start investing the better off you're
[70]
gonna be then that's why it's why I
stress how important is to start
[75]
investing for retirement as early as
possible the second part of the equation
[79]
which I probably consider to be the
toughest is determining what your
[83]
average yield is and we're not only your
average yield for this year but we you
[88]
know what is the average yield that you
can expect to receive over the lifetime
[92]
of your investing history that is
probably the trickiest part of this but
[96]
I'm gonna show you guys an easy way to
tackle that we're gonna talk about what
[99]
is the total amount of capital you need
to invest to generate $100,000 in income
[105]
that's actually really easy I'm about to
show you guys that first so we'll start
[108]
there how it then we're gonna break that
down to how much you personally need to
[112]
invest four months to accomplish this
we're also gonna look at your projected
[117]
dividend growth rate every year I have a
couple tools handy to help you guys
[120]
calculate this one a basic calculator
and we're also using my favorite free
[126]
financial calculator online FN
calculator com I've mentioned this in a
[130]
previous video so check it out f
calculator comm let's start off with
[134]
what amount of total capital you would
need to have invested to generate one
[140]
hundred thousand dollars a year in
dividends this I think you're gonna find
[144]
very simple let me show you how you do
that it's really dependent upon your
[148]
yield that you receive throughout the
your lifetime of investing so what you
[153]
would do is you type in one hundred
thousand dollars into your calculator
[157]
and divide that number by a yield so
let's say 0.04 so if your yield west
[163]
0.04 if that was your average annual
yield you would need to invest two and a
[168]
half million dollars to do this but if
your yield was higher if you throughout
[179]
the course of your investing career you
had a higher yield let's say five
[185]
percenter five and a half percent then
now you're under two million dollars so
[189]
you're at one point eight now I know
these are big numbers and let's just
[193]
keep it real here guys most people I'm
gonna be honest this is probably true
[197]
for myself as well most people may not
be able to obtain or hit this number
[202]
okay I'm just being real with you just
being real but you can definitely strive
[208]
for it I mean if you even get half of
$100,000 a year in dividends even if you
[214]
come up with like $50,000 a year in
dividend income in my opinion you're
[220]
still better off than like 90% of the
population you're still killing it
[223]
you're still crushing it currently you
like what do you on track for how much
[227]
do you think you'll making dividends by
the time you retire you know at the
[231]
moment I'm probably on track for
anywhere from sixty to eighty thousand
[235]
dollars a year in dividend income
depending on how things go that's what
[238]
I'm expecting at the moment and that
would include if I took my wife and I
[243]
his Roth IRAs the income from that plus
my standard taxable brokerage account
[248]
the three of those counts working
together would I would expect in the
[252]
future will generate us anywhere from
sixty to eighty thousand dollars a year
[255]
in passive dividend income that's what
I'm expecting okay let's talk about the
[260]
trickier part of this equation is
there's two things first of all if
[265]
you've ever
heard anything about compounding
[267]
interest and I've talked about this in
some of my other videos on this channel
[271]
the sooner you start investing the less
you'll have to invest in the long-run
[277]
why why is that well because that the
longer your money has to grow the sooner
[283]
you put your money to work the more it's
gonna work for you does that make sense
[286]
so that's why your age of when you start
investing is so important now when is a
[291]
reasonable age for person to start
investing you know I would think beat
[295]
sometime between the age of 25 and 30 if
you're able to invest before that then
[301]
hey you're well ahead of the curve the
second main factor in this one I think
[305]
is the hardest one to pin down the
hardest one at least for me is the
[309]
dividend growth rate so think of it this
way ladies and gentlemen you have two
[313]
things working for you you have your
compounding interest money growing from
[317]
other money and that you have a dividend
growth rate well what is that so if
[322]
you're new to dividend investing what
you'll learn is that companies often
[326]
will raise their dividends or increase
their dividend payout over time usually
[332]
they increase it each year is that
guaranteed absolutely not it's not but
[338]
in general if the economy is doing well
the company's doing well they're going
[342]
they're likely to arrays their dividend
payout every year so let's for example
[346]
let's say in the first year their payout
is $1 the next year their payout as $1 5
[352]
the next year their payout $2 and 15
cents and so on and so forth I don't
[356]
know about you guys but I was really
curious of what the average annual
[360]
dividend increases on average for
different companies and what I found is
[367]
this anywhere from 3 to 7 percent but
according to this article on seeking
[372]
alpha this is one of my favorite
investing websites this and investopedia
[376]
are probably my two favorite websites to
learn about investing there's an article
[380]
and I'll link this below so you guys can
check it out so you can read the full
[383]
article says has dividend growth kept up
with inflation and if you read down here
[388]
I'm just gonna cut through all this what
they did is they compared the average
[391]
dividend increase for 51 years and
compared it against the inflation rate
[398]
and what they found out
251 years of tracking this data is that
[402]
dividends did outpace inflation so the
average if inflation increases 4.1
[408]
percent or the average annual dividend
growth increase was for OS five point
[414]
four percent so yes your dividends
should in theory keep up with inflation
[418]
now like I said not it doesn't mean
though you you should not expect your
[423]
dividend payout to go up every year
during the recession like in 2008 if you
[426]
look back at the divot in the history of
companies many companies scaled back
[430]
their dividend payout because of the
crash in the economy
[434]
some of them cut it all together and
then they reinstate it and they get get
[437]
going again others just scale back how
much they're paying out but then as the
[441]
economy is improving they keep
increasing that payout over time so
[445]
that's just what you can expect so to
help us calculate this or to help help
[449]
me this is let me just explain this is
the way I look at it you can if you have
[454]
different opinions different ideas
please share them below I'm always open
[457]
to learning from you guys or hearing and
what what your thoughts are on this kind
[460]
of stuff from what I've learned about
dividend investing the higher end range
[465]
of dividend growth payouts
is about 7% the lower in end range is
[470]
about 3% and the average according to
that article is about five and a half
[475]
percent somewhere in there give or take
as an investor or somebody looking to
[479]
plan for retirement I'm always asking
myself how do I make my retirement
[484]
planning more successful what can I do
to ensure that I'm successful and be
[489]
realistic about my goals my targets and
all things like that and so what I like
[494]
to do in or what I did in this example
is I didn't use the average growth
[500]
increase you can if you want it's
totally up to you but I use the three
[504]
and a half percent because I I want to
be conservative and I want to make sure
[508]
I'm successful and realistic about these
goals so what I did is I said okay in
[513]
year one so let's pretend that chipper
has a portfolio you better believe I
[517]
have a portfolio so chipper has the
portfolio he's darn proud of it too if
[521]
you look at chippers investment account
and you look at all the stocks in that
[525]
account all the ETFs and you take a
weighted average yield on all of those
[530]
investments chipper starting yield is 3%
for example in my own portfolio I have
[536]
about like just within my standard
brokerage account I think I have about
[539]
20 different stocks and couple ETFs in
there as well my average yield is about
[543]
three and a half percent on average I
got some investments that have a
[547]
dividend yield of 2% other investments
such as my real estate investment trusts
[550]
have yields as high as 5% are five and a
half percent but in this example we're
[555]
saying that the annual average yield in
Trevor's portfolio is 3% and then what
[560]
we're gonna do is we're going to apply a
dividend increase to that every single
[565]
year and so if we if we think our
average dividend increase to three and a
[571]
half percent we're because we're being
conservative and for conservative I
[574]
think we're gonna have a better chance
of being successful with this figuring
[578]
out how much to invest then we go from
3% in the first year the next year we
[584]
get that three and a half percent
increase so basically we're taking 3
[589]
percent times 1.0 3 5 which is the
conservative rate I'm using in this
[597]
example and then the next year we're
gonna go from 3 point 1 1 to 3 point 2 1
[604]
and it's that times one point zero three
five and if I if we drag this down and
[613]
we do this for 40 years for 40 years by
year 40 our yield on cost might be
[620]
around 11 percent of a yield okay now
you're saying well that's really high
[624]
well it could very well be that way
because if you've held on to those
[629]
investments a long time they can
continue to compound they're gonna
[633]
potentially get a lot of growth
increases or dividend raises throughout
[637]
the history of your investing career and
you know it's not it's not unrealistic
[642]
to eventually have a ulong cost that
could be as high as 10% even up to 20%
[647]
to help me calculate this and what I did
for this example is what is an average
[652]
annual yield I can use to plug into my
compounding interest calculator and
[656]
because when you first start your yields
gonna be low in this case like 3% cuz
[661]
tripperz yields only 3% in this example
and we don't want to use a yield of 11%
[666]
because
that might not come until forty years
[669]
down the line if you have 40 years to
invest so what I did in this example to
[673]
give you an easier way to think about
this and it's not a perfect science I'm
[678]
not claiming this to be the all-knowing
way to calculate this you would have to
[682]
be more meticulous in this if you wanted
to get it more accurate but I took the
[687]
middle line I said okay let's go down
here somewhere in the middle between a
[691]
year 15 and year 20 and let's take some
of these different potential yields so
[696]
what I would like to do you guys in this
example is I want to take somebody who's
[700]
a 30 year old who's starting to invest
because I think by the time a person
[704]
third turns 30 I would really hope
they're thinking about their retirement
[708]
their future and really going gun ho are
starting to go gun ho on the retirement
[712]
a person starting off at 30 let's
pretend they want to and retire at 65 so
[717]
they're 35 years away from retirement
which is why it says that so what we're
[721]
gonna do now first is we need to figure
out how much in total we money to invest
[726]
in order to achieve $100,000 per year so
we're gonna pull up our handy-dandy
[731]
calculator here on your phone or on your
computer
[733]
you're gonna type in $100,000 and since
were 35 years away from retirement and
[741]
this is you can't see it but this is a
conservative yield column
[744]
it's 5.2 percent so now I'm gonna divide
that $100,000 by 0.05 to so what this
[752]
calculation tells me is that in order
for me to make $100,000 a year and
[757]
dividend income with a yield of 5.2
percent I would need to invest a total
[764]
over my lifetime of about 1.9 million
dollars or just under two million
[768]
dollars now if these numbers scare you
because it scared me the first time
[771]
don't worry it scared me the first time
that we know the total number so how
[775]
much do we need to invest for a month if
we're 30 years old or starting at 30 or
[779]
35 years away from retirement now we're
gonna go to our F and calculator okay
[784]
and this calculator will help you
determine how much you might need to
[789]
invest per month by age the opinion on
the yield you get so we're gonna type in
[793]
what the our calculator said we're gonna
it's 1 1 million nine hundred and twenty
[799]
three thousand so
1 million 923 zero seven six zero seven
[808]
six so that's how much we need to invest
and our average yield was 5.2 percent if
[813]
I'm not mistaken let me just flip back
real quick to my Excel document yep 5.2
[819]
percent was their yield so that's what
we're gonna put here in this compound
[823]
the interest calculator we're saying our
retirement age is 65 what's great about
[828]
these calculators is you can play with
these numbers all day it's really fun at
[832]
least for a geek like me this pulley
turnout guy this whole area and then
[835]
what we're gonna do is we're gonna hit
the calculate button and this these
[839]
numbers down here guys
what this is showing is it's showing all
[843]
the different amounts you might need to
invest per month in order to hit this
[848]
total retirement goal of 1.9 million
dollars with an average annual return or
[854]
average annual yield of 5.2 percent and
so if you're thirty you roughly need to
[859]
invest about seventeen hundred dollars
per month as you can see the further you
[863]
wait to read to invest the larger these
numbers get and it gets almost
[868]
impossible which is why which is why
don't beat yourself up if you don't feel
[872]
you can hit this a goal I mean I don't
know if I can hit this goal but like I
[876]
said even if you can just have 20,000
and dividend income someday are fifty
[881]
thousand and dividend income it's still
gonna totally change your life and
[884]
you're gonna be better off in retirement
I promise you more than ninety percent
[888]
of the population if you do this now if
you take control of your retirement
[891]
planning and and start investing for
dividends like this you could really
[895]
change your life and and have something
that also to pass on to the next
[899]
generation when you pass away like I
said guys this is not a perfect science
[903]
by any means the if you wanted to get
even more meticulous you would have to
[907]
carefully analyze each year and work and
do the calculation each year over a
[912]
longer time span to get to get more
precise on the average yield you know
[917]
each yield as it grows but I like to use
an average number I don't think anywhere
[923]
from four to six percent I think is
realistic it can I think it can totally
[927]
happen and especially if you have a long
time span to invest yeah I think you can
[932]
make that happen
and this will give you some insight too
[936]
and it's almost a wake-up call and it
was for me of like wow I really need to
[940]
get on my investments like like now if
I'm gonna have a substantial passive
[945]
income in retirement as we wrap up this
video I want to leave you guys with this
[949]
many of you had mentioned that it might
take three million dollars to invest to
[954]
achieve the $100,000 a year in dividends
you know and realistically that might be
[961]
the case if a person only has one year
to invest before retiring but that is
[966]
not the case if a person is able to
start investing earlier on in life if
[970]
they have a longer time horizon of let's
say they started investing at 25 or 30
[976]
years old then their money has much more
time to to grow as we mentioned with
[981]
compounding interest and also the
company's over that time horizon are
[985]
likely to increase their dividend
payouts so what you find is it takes far
[990]
less than three million dollars to
achieve that goal that is the video for
[994]
today guys I hope you liked it if you
did make sure you drop a like leave a
[997]
comment down below because I love
reading all of your comments and I try
[1001]
to respond to as many people as possible
if you're new to the channel welcome
[1005]
don't forget to subscribe because every
single week here on money and life TV
[1010]
we're all about helping you get fiscally
fit as we teach finances investing taxes
[1016]
and so much more so make sure to
subscribe and hit that Bell notification
[1020]
icon to not miss any of our future
uploads with that being said have a
[1024]
great week everybody and I'll see you in
the next video live life on caged Cheers
[1048]
you
Most Recent Videos:
You can go back to the homepage right here: Homepage