How much money do you actually need invested to live off dividends in Australia? Groceries, power bills and holidays, all covered by your investments without having to go to work. It sounds pretty good, but once you put numbers to it, the amount can get big quickly.
In this video I work through the numbers, the traps, and one assumption that can make the whole thing a lot harder than it needs to be. Each button jumps the video to that part.
Divide the income you need by the dividend yield. At a 3.5% yield you need about 28.6 times your annual income: roughly $1.71 million for $60,000 a year. At a 2% global yield it’s 50 times, or $3 million. But you don’t have to live on dividends alone. Taking some income from planned sales as well can lower the target, as long as you allow for bad markets.
1. How much income does your portfolio need to pay?
Start with your spending. Work out how much income your investments need to provide each year, including irregular costs like replacing the car or repairs to the house, then allow for any other income such as the Age Pension. In these examples we’re talking about cash dividends before personal tax, without franking credits. I’ll come back to franking at the end.
The calculation itself is simple: annual income needed ÷ dividend yield. The dividend yield is the annual dividend per share divided by the share price, so a $100 share paying $3.50 a year has a 3.5% yield.
The harder question is what yield to use. S&P Dow Jones Indices research shows Australian shares have historically paid higher yields than global shares. From March 2003 to December 2024, average yields were roughly:
The Australian market’s yield was 3.5% at the end of 2024. That’s a snapshot rather than the long-run average, but it’s a sensible example. Here’s what different income targets need:
| Income a year | At 3.5% (Australia) | At 2% (global) | At 5% (high yield) |
|---|---|---|---|
| $40,000 | $1.14m | $2.00m | $800k |
| $60,000 | $1.71m | $3.00m | $1.20m |
| $80,000 | $2.29m | $4.00m | $1.60m |
Cash dividends before personal tax, excluding franking credits.
At 3.5% you need about 28.6 times your income. With a global portfolio at a rounded 2% yield, it’s 50 times, so $60,000 a year needs $3 million. Try your own numbers:
Cash dividends before personal tax, without franking credits. A 4% starting withdrawal is an example, not a promise your money will last. Illustration only.
2. Why a bigger yield can be a warning
This is usually where someone says, “Why don’t I just buy shares with a higher yield?” At 5%, $60,000 only needs $1.2 million. The maths works. The real question is whether the dividend will last.
A yield can rise for two very different reasons: the company pays a bigger dividend, or its share price falls. Imagine a $10 share paying 35 cents a year. That’s a 3.5% yield. If the price falls to $5 and the quoted dividend stays at 35 cents, the yield on screen doubles to 7%.
If you already own those shares, their value has halved and your income hasn’t improved at all. For a new buyer, the high yield only helps if the company can keep paying it, and if the price fell because the business is struggling, last year’s dividend might not continue.
Take , the SPDR S&P/ASX 200 ETF, launched in 2001 and the oldest ASX 200 ETF on the exchange. Around the global financial crisis, falling prices pushed its indicated yield higher. Investors weren’t getting bigger cash payments; prices had collapsed.
And companies do cut dividends. Telstra went from 31 cents a share for the 2017 financial year to 22 cents the next year, including special dividends. That’s a cut of about 29%. If that money is meant to cover your bills, you need room for payments to change.
3. What actually supports a dividend?
For a dividend to last, the business needs profits and cash flow to support it. A company might keep paying for a while even if revenue has stalled or gone backwards, so it’s worth asking how those payments are being funded.
Over short periods, share prices move around because people are willing to pay more or less for the same business. Over longer periods, business growth matters. Boston Consulting Group research into the top-performing quarter of S&P 500 companies attributed 74% of shareholder returns over the 10 years it studied to revenue growth. That’s one group of companies in one period, but it’s a good reason to look beyond the dividend.
Revenue growth also has to turn into profit and cash. Selling more while losing more money doesn’t help shareholders. So ask whether the business can pay the dividend and keep maintaining and growing its operations. A high yield attached to a deteriorating business can leave you collecting income while your capital goes backwards.
4. Why a great business might pay a small dividend
When a company makes a profit, it can reinvest it in new products, equipment or stores, or return it to shareholders as dividends. Many do both. If a business can reinvest at attractive returns, keeping the money can benefit shareholders over time.
Apple paid no dividends between 1995 and 2012. It invested in the business and built up cash instead. If your rule was “I only buy companies that pay a dividend”, Apple wouldn’t have made your list for that entire period. That doesn’t make every company that skips a dividend a great investment, but a small dividend doesn’t automatically mean a poor return.
Larger payouts often come from mature businesses with fewer growth opportunities. Returning surplus cash can make perfect sense, but lean too heavily on them and you can end up with less growth and a portfolio full of very similar companies.
Growth still matters in retirement, because life keeps getting more expensive. At 3% inflation, a lifestyle costing $60,000 a year today costs about $80,600 in 10 years. Your income needs to keep up. That’s why I look at the business first: is it a good investment, and can it keep supporting those payments?
5. The other part of your return
So far we’ve treated dividends as the only money your portfolio gives you. But you also get capital growth, or capital losses. Add income and the change in value together and you have your total return. If you collect $5,000 in dividends but your shares lose $5,000 in value, you’ve made nothing before tax and costs.
Vanguard’s 2026 index chart puts this in perspective. Over the 30 years to June 2026, Australian shares returned about 9% a year, with $10,000 growing to about $133,000. International shares returned about 8.6% a year. Those figures assume income was reinvested and exclude costs and taxes, so someone spending the income along the way wouldn’t get the same result.
Be careful with that 9%. It doesn’t mean you can take out 9% a year and expect your money to last. Markets don’t deliver their long-term average neatly every year.
6. How this changes the retirement calculation
Here’s the assumption that makes the target so demanding: every dollar you spend has to arrive as a dividend. Instead, you could fund your spending with a mix of dividends and planned sales, so both income and capital growth contribute.
A simplified example: your portfolio is worth $1.5 million and you plan to withdraw $60,000 in the first year, a 4% starting withdrawal. At a 3.5% cash yield it pays $52,500 in dividends, and you sell $7,500 of investments to make up the difference.
| Dividends only | Dividends plus planned sales | |
|---|---|---|
| Portfolio needed | about $1.71m | $1.50m |
| Dividends (3.5%) | $60,000 | $52,500 |
| Sales | $0 | $7,500 |
| Income | $60,000 | $60,000 |
You haven’t found a higher-paying company. You’ve changed how you access your portfolio. Selling some units reduces how many you own, but growth in the rest can offset the withdrawals. It also might not.
7. What about franking credits?
In Australia there’s one more adjustment. Eligible investors can use franking credits attached to dividends to reduce tax, and some receive a refund. The result depends on your circumstances and eligibility, so $60,000 in cash dividends isn’t automatically $60,000 to spend after tax.
Franking can improve the result, but work out the real effect rather than adding a fixed percentage to every dividend. My franking credits guide shows how it works for ETFs.
What popular ETFs yield today
For a sense of where yields sit now, here are trailing 12-month distribution yields for some widely held ETFs, and what $60,000 a year from distributions alone would need. Yields move with prices and payouts, so treat these as a snapshot.
| ETF | 12-month yield | Franking | Needed for $60k |
|---|---|---|---|
| 3.52% | 85% | $1.70m | |
| 3.29% | 75% | $1.82m | |
| 3.17% | 75% | $1.89m | |
| 3.16% | 75% | $1.90m | |
| 1.21% | 0% | $4.96m | |
| 1.02% | 0% | $5.88m |
Trailing 12-month cash distribution yields as at 9 November 2026, from ReviewETF. Franking levels are approximate and change each year. Past distributions are not a reliable indicator of future distributions.
Notice how much the global ETFs change the maths. and pay around 1% because many of their companies reinvest profits or buy back shares, which is exactly why a dividends-only plan pushes people towards a narrow, high-yield Australian portfolio. A core of Australian and global shares with planned sales can be more diversified. You can compare yields for every ASX ETF on ReviewETF’s income calculator.
So how much do you need?
To live entirely off dividends you need a big enough capital base, a manageable income requirement, or a mix of both. At a 3.5% yield that’s about 28.6 times your annual income: roughly $1.7 million for $60,000 a year before personal tax.
But the quality and sustainability of that income matters as much as the starting calculation. You want a portfolio that can keep paying the bills as markets change and life gets more expensive.
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Get my free portfolio review →Frequently asked questions
How much do I need to live off dividends in Australia?
Divide the income you need by the dividend yield. At a 3.5% yield you need about 28.6 times your annual income, so roughly $1.71 million for $60,000 a year before personal tax and excluding franking credits. At a 2% global yield you need 50 times your income.
What dividend yield should I use for Australian shares?
S&P Dow Jones Indices research found Australian shares averaged a yield of about 4.1% from March 2003 to December 2024, against 2.3% for global shares and 1.9% for US shares. The Australian market yielded 3.5% at the end of 2024, which is a reasonable planning example.
Is a high dividend yield always good?
No. A yield rises when the dividend grows or when the share price falls. A high yield caused by a falling price can signal a struggling business, and the dividend may be cut, as Telstra’s was between the 2017 and 2018 financial years.
Can I sell some ETFs instead of living on dividends only?
Yes. Funding spending from a mix of dividends and planned sales lets capital growth contribute. For example, $1.5 million at a 3.5% yield pays $52,500, and selling $7,500 makes up $60,000. The risk is having to sell more units in a falling market, so allow for bad years.
Do franking credits change how much I need?
They can improve your after-tax income, and some eligible investors receive a refund, but the effect depends on your circumstances. Calculate the real effect rather than adding a fixed percentage to every dividend.