How Much Do You Need to Invest to Quit Work and Live Only Off Dividends?

40 years of work life is a long time. You can give up working before that. Here’s how you can invest and live off dividend income.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Where do you see yourself 20 years from now? Are you relaxing on a beach or pursuing your hobby without worrying about daily expenses? You can make this dream come true with proper planning. To know how much you need to invest to give up work, you need to know how much you want every month and do a reverse calculation. If you want $60,000 a year, you need a $1 million portfolio giving a 6% yield. 

How to plan your investments to give up work early? 

This financial plan will need three stages: 

  • The growth stage, where you work towards making investments reach $1 million. 
  • The dividend stage, where you simultaneously start investing in the 6% yield. 
  • The third stage is growing your dividend income. 

If you want to live off your dividend income, ensure it grows with inflation. An average Canadian’s work life is 40 years (age 25 to age 65). You can retire in 25 years with the above plan. 

How to build a $1 million portfolio

Your Tax-Free Savings Account (TFSA) allows you to invest $6,000 a year on average. But that alone is not enough. Your salary and Canada Pension Plan (CPP) contribution grow every year, and so should your investments. If you grow your investment by 5% every year ($6,000 in 2023, $6,300 in 2024, and so on), you can accelerate your investments. 

Now, you may say my TFSA limit doesn’t permit it. You can use a combination of a Registered Retirement Savings Account (RRSP), TFSA, and any other registered account to build a million-dollar portfolio. 

YearInvestmentInvestment Return @ 12%Total Amount
2023$6,000 $6,000.0
2024$6,300$756.0$13,056.0
2025$6,615$1,566.7$21,237.7
2026$6,946$2,548.5$30,732.0
2027$7,293$3,687.8$41,712.9
2028$7,658$5,005.5$54,376.1
2029$8,041$6,525.1$68,941.8
2030$8,443$8,273.0$85,657.4
2031$8,865$10,278.9$104,801.1
2032$9,308$12,576.1$126,685.2
2033$9,773$15,202.2$151,660.7
2034$10,262$18,199.3$180,122.1
2035$10,775$21,614.6$212,511.9
2036$11,314$25,501.4$249,327.2
2037$11,880$29,919.3$291,126.0
2038$12,474$34,935.1$338,534.7
2039$13,097$40,624.2$392,256.1
2040$13,752$47,070.7$453,079.0
2041$14,440$54,369.5$521,888.2
2042$15,162$62,626.6$599,676.4
2043$15,920$71,961.2$687,557.4
2044$16,716$82,506.9$786,780.1
2045$17,552$94,413.6$898,745.2
2046$18,429$107,849.4$1,025,023.8
How to build a million-dollar portfolio.

Now that we understand the second column, the third column is the average return your portfolio is estimated to generate in 24 years. A 12% return is reasonable when you invest in equity. You can get a 12% average annual return by investing in a fundamentally strong growth stock for the long term. 

Invest in a growth stock for long term 

Tech stocks like Descartes Systems (TSX:DSG) and Constellation Software have given a 19-20% compound annual growth rate (CAGR) in 20 years. They still have the potential to grow double digits in the long term. 

Created with Highcharts 11.4.3Descartes Systems Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Descartes stock keeps growing over the long term, as trade and logistics get complicated. Trade continues in a war or in a pandemic. Descartes offers supply chain management solutions to help companies adapt to these challenges efficiently. I expect Descartes’s stock to grow at a CAGR of 15% in the coming five years. 

While investing in stable growth stocks, consider investing a small amount (less than 5%) in stocks with higher growth potential. Keep booking profits at 50-80% in these stocks, as they may not sustain their peak price.

Invest in a growth stock for short term 

Created with Highcharts 11.4.3Hive Digital Technologies PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Hive Blockchain Technologies (TSX:HIVE) is a high-growth stock that can double your money in months. But it cannot sustain the peak as cryptocurrency has not yet achieved global acceptance. The best time to buy the stock is at or below $4 and sell it at $8. Do not keep holding unless there is a crypto boom. 

Among all crypto miners, I believe Hive can survive a recession because its exposure is in the most stable crypto, Bitcoin. Moreover, it is monetizing its graphics processing unit (GPU) powered data centres by opening them to developers for generative artificial intelligence and high-performance computing workloads. These two factors help the stock revive after every crash. 

As you book profits in growth stocks, you can invest the proceeds in a dividend-growth stock like BCE, which gives a 5% average yield and grows dividends by 5%. 

Should you invest $1,000 in CIBC right now?

Before you buy stock in CIBC, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and CIBC wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Bitcoin, Constellation Software, and Descartes Systems Group. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

senior relaxes in hammock with e-book
Dividend Stocks

How I’d Invest $8,200 in Canadian Monthly Dividend Stocks to Pay for My Retirement Lifestyle

If you have some cash on hand, then these monthly dividend stocks can provide you with cash for life.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Here’s Exactly How $20,000 in a TFSA Could Grow to $300,000

Can you grow $20,000 into $300,000 by holding the iShares S&P/TSX Index Fund (TSX:XIC) in a TFSA?

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Use $15,000 in a High-Yield Dividend ETF for Steady Passive Income

This ETF has it all, a strong portfolio of dividend payers, along with a high yield for investors.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

A 9.9 Percent Dividend Stock Paying Cash Every Month

If you are looking to park your money for the short term and earn from it, this 9.9% dividend stock…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Have Room in Your TFSA? 1 Canadian Dividend Champion for April Investors

If you've got extra cash in your TFSA, the latest dip in markets may provide you with a golden opportunity…

Read more »

engineer at wind farm
Dividend Stocks

Beginner Investors: How I’d Allocate $5,000 in 2 Safe Dividend Stocks

There are plenty of great dividend stocks on the market, but these two are buy-and-forget candidates that will boost your…

Read more »

grow money, wealth build
Dividend Stocks

Invest $25,000 in These 3 Dividend Stocks for $1,600 in Annual Income

These three Canadian dividend stocks could deliver a reliable passive income of over $1,600 annually.

Read more »

Woman in private jet airplane
Dividend Stocks

Why I’d Start My Investing Journey With $7,000 in 4 Foundational Stocks

These four stocks have high-quality and reliable operations, making them among the best long-term investments in Canada.

Read more »