I Plan to Retire in 5 Years with $500,000 and Dividend ETF Income

Anyone planning to retire in 2, 5, or 10 years must develop a solid plan. Retiring isn’t inexpensive, and this is true no matter where you plan to call home. Whether it’s in Thailand or Main Street USA, you need a certain amount of money to live a comfortable lifestyle. 

For one Redditor posting in r/dividends, they are trying to determine how to retire by the age of 40. Their goal is to call it quits in five years in Thailand, without access to specific accounts. As a result, they are hoping to invest some cash into an ETF that can provide a solid monthly dividend. 

Bob’s Situation

Calling themselves “Bob,” this Redditor plans to retire in Thailand within five years. At this point in their life, they will have turned 40. Unfortunately, Bob can’t access their 401(k) or Roth IRA as of yet. Instead, Bob has around $500,000 in uninvested cash, and they are hoping to make a smart financial move. To effectively “retire” and leave the workforce, Bob is hoping to earn around $3,000 per month through a dividend. 

To achieve this, Bob wants to invest in an ETF that pays enough to reach a $3,000 monthly goal. This is a fairly ambitious goal, and even with a substantial investment amount, “Bob” will need to make some informed financial decisions to reach their target number. 

What’s Bob’s Next Move? 

First and foremost, Bob should be looking at multiple ETFs to diversify their portfolio and hedge against market downturns. Even if Bob is hoping to live off the dividend return, there still needs to be an opportunity to earn money on the principal, which is why diversity is so important. 

The good news is that dividend ETFs are generally considerably more stable when it comes to avoiding market fluctuations. This isn’t to say that ETFs won’t be susceptible to market fluctuations, but investing in well-established ETFs is likely to be the best path forward. 

In the comment section of the Reddit post in r/dividends, there is a heavy emphasis on making sure Bob picks the right yield. This yield will determine the annual income generated from an ETF, so this is where Bob needs to focus first. 

While there is no agreed-upon yield in the comment section, JEPI is a well-mentioned option. With an 8% yield, Bob should earn around $12,000 annually from a $150,000 investment. Another recommendation, with a $200,000 investment, would be JEPQ. At an 11% yield, the annual return would be $22,000. Lastly, investing $150,000 into SCHD at a 3.5% yield will provide a $5,250 return. In total, this would give Bob $39,250, or $3,270 per month, providing a $270 monthly buffer. 

Alternatively, there is a lot of emphasis on splitting the investment between SCHD at 50%, SPYI at 25%, and QQQi, with the remaining 25% allocated to each of these. At this rate, Bob can expect to receive an annual dividend of $36,000. 

The bottom line is that there are multiple ETFs available for Bob to invest in, and you can structure this $3,000 return several ways. The ETFs listed above are not just some of the most popular, but also the most stable. This should give Bob the confidence that the dividend return will last for the foreseeable future, giving him enough confidence to not just move to Thailand, but also to avoid going back to work. 

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