compoundcoast
Live off it · signature

Live off dividends — required portfolio, taxed honestly

Set what you want to spend after tax each month; this solves back through the actual 2026 engine — qualified dividends stacked into the 0/15/20% LTCG brackets, non-qualified through ordinary brackets, NIIT 3.8% lesser-of, state tax, and fee drag — for the portfolio you would need, always as a range.

2026 brackets · Rev. Proc. 2025-32 · asOf 2025-10 NIIT · IRC §1411 S&P 500 yield ~1.1% · multpl · asOf 2026-07 Updated 2026-07-06

Set your target spending and portfolio yield to solve for the required portfolio.

Assumptions

live · solved through the 2026 tax engine
Today's dollars — the engine grosses it up through taxes and fees.
Reality anchor: the S&P 500 yields ~1.1% (multpl, asOf 2026-07). Well above that is a dividend tilt, not the market.
Broad US index funds run mostly qualified (0/15/20% brackets); REITs, most BDCs, and bond funds pay ordinary income.
Filing status
Sets the 2026 brackets, standard deduction, and NIIT threshold.
Wages, interest, pre-tax withdrawals — fills the lower brackets first and pushes dividends higher.
Flat approximation — most states tax dividends as ordinary income (0% in FL/TX/WA/NV, up to ~13% top-bracket CA).
100 bps = 1.00%/yr of the portfolio, paid out of your income stream.
Dividend-cut stress (−30%)
The 2008–10 S&P 500 cut was ~−24% peak-to-trough; the preset is deliberately harsher.
S&P 500 dividends-per-share have grown ~5%/yr nominal long run (multpl). High-yield tilts often grow slower.
CPI-U rose 2.7% over the 12 months to December 2025 (BLS).
Set your target spending and yield to size the portfolio.
—
Naive spend ÷ yield — Tax + fee drag — Net yield kept — ▲ —
Median real net income Illustrative yield-scenario range
Set your inputs — this sizes the portfolio through the real tax engine, then projects your net income in today's dollars across 25 years. Markets and yields vary, so the honest answer is a range, not a single number.
Yield reality check Enter a yield to compare it against the S&P 500's ~1.1% market reality.

Required portfolio band

low · typical · high — illustrative

Marks are the low / typical / high required portfolio from an illustrative ±15% yield-scenario spread — a planning band, not measured percentiles. The shaded band spans from the naive spend÷yield answer up to the honest typical estimate: that width is the tax-and-fee reality gap.

Tax-drag waterfall

gross → qualified → ordinary → NIIT → state → fees → net

At the typical required portfolio. Qualified dividends fill the 0/15/20% LTCG brackets stacked above ordinary income; non-qualified dividends run through ordinary brackets; NIIT applies its 3.8% lesser-of rule; state is a flat approximation.

Dividend-cut stress

−30% income overlay
— net income after cut
— of spending target covered
— portfolio sized to survive the cut

Applies a −30% cut to portfolio income at the typical required portfolio — deliberately harsher than the realized 2008–10 index cut (~−24%). Concentrated high-yield portfolios historically cut deeper than the index.

Real purchasing power

dividend growth vs inflation
— real coverage in year 10
— real coverage in year 20

The flat line is your constant-real spending target; the curve is projected real income if dividends grow at your rate while prices rise with inflation.

Methodology & sources
Show the math ›
Set your inputs to see the worked gross-up for your numbers.
Assumptions & sources ›
AssumptionValueSource · asOf
Ordinary brackets & standard deduction 2026, single / MFJ IRS Rev. Proc. 2025-32 (OBBBA-amended) · asOf 2025-10
Qualified-dividend / LTCG brackets 0% / 15% / 20% IRS Rev. Proc. 2025-32 §2.03; qualified treatment per IRC §1(h)(11) · asOf 2025-10
NIIT 3.8% lesser-of, $200k/$250k MAGI IRC §1411 (statutory, not indexed) · asOf 2025-10
S&P 500 yield anchor ~1.1% trailing multpl (1.05% current), cross-checked GuruFocus 1.079% (2026-06-30) · asOf 2026-07
Dividend growth default 5%/yr nominal multpl — S&P 500 DPS growth by year, long-run average · asOf 2026-06
Inflation default 2.7%/yr BLS CPI-U, Dec/Dec 2025 · asOf 2026-01
Dividend-cut stress −30% (preset) 2008–10 realized index cut ~−24% (multpl DPS series); preset deliberately harsher · asOf 2026-06
Yield-scenario band ±15% of typed yield — illustrative editorial planning band, NOT measured percentiles; exists so the output is never a single point
State tax flat rate, user input approximation — state bracket engines are out of scope in v1; principal is never modeled as spent (income-only plan)

The engine attributes to dividends only the incremental tax they generate on top of your other income (the Qualified Dividends and Capital Gain Tax Worksheet stacking). MAGI is approximated as other income + dividends. Local/city taxes, itemized deductions, credits, and foreign withholding are not modeled — all figures are estimates for planning illustration.

The 4% yield trap

honest caveat

Typing a 4% yield makes the required portfolio look pleasantly small — but the broad US market yields roughly 1.1% (multpl, asOf 2026-07), near its all-time low. Getting to 4% today means concentrating into high-yield sectors: REITs, BDCs, MLPs, covered-call funds, telecoms, tobacco. That trade is not free income. It typically swaps growth and resilience for cash now: high-yield portfolios historically grow distributions more slowly, cut them harder in recessions (the 2008–10 index cut was ~−24%; many yield-chasing holdings cut far deeper), and shift more of the payout into non-qualified income taxed at ordinary rates.

This page will happily solve for any yield you type — that is the point of the yield-reality chip, the qualified-share input, and the −30% stress toggle. If the plan only works at 4% yield with zero cuts, the projection is telling you the plan is fragile, not that the portfolio is small. An alternative framing for the same spending target is total-return withdrawal — see the safe withdrawal rate page.

Written by Author to be finalized before launch · Updated 2026-07-06

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