How Much Money Do You Need to Live Off Investments? [Videos+PDF]

happy retired couple living off investments

Living off investments defines financial independence, but getting there can be challenging.

How much money do you need to live off investments? Here’s the formula: Divide the desired annual income by the expected yield. If you want $10,000 monthly investment income, and expect a 5% yield, divide $120,000 by 5% for the amount of money you’ll need to live off investment income, or $2,400,000 in this example.

This is the simple formula to show how much money it will take for you to live off investment income only since yield is a measure of the income an investment generates.

In other words, you want to live off the income your investments generate, without spending your investment capital, or without planning around hard to predict capital gains. This is the ideal way to “live off investments” if you want to delay, reduce, or avoid making withdrawals that slowly deplete your valuable investment savings.

This investment income approach can be a good strategy  for investors short on retirement savings.

After we stumbled into early retirement in late midlife, we pondered how much money we needed to live off our investments. Knowing we didn’t want to begin depleting our savings by making monthly withdrawals, we learned all about creating diversified income streams and gradually implemented what we learned over the next few years.

In this post, I’ll share:

  • Ways to reduce the amount of money you need to live off investments
  • 3 crucial factors to consider before attempting to live off your money
  • Super important risk related factors for anyone attempting to live off investments
  • Strategies to make it easier to live off investments
  • How and why living off investments differs from making systematic withdrawls from your account 

Note that I use the terms retirement savings and investments, as well as living in retirement and living off investments interchangably since living off investments equates to retirement for most people. 

Factors for Living Off Investments

We all love simple formulas like the one I gave above to calculate the amount you need to live off investments. However, there are several more factors you’ll want to keep in mind as you use that formula to estimate the amount needed to live off your investments.

1. Sufficient Funds

First, the reality is that traditional investment income alone doesn’t generate enough money for most people to live comfortably in retirement. You can see that for someone with $2,400,000, making $10,000 a year is achievable since a 5% annual yield is doable for income focused investors. Yet studies show that most people don’t have anywhere near $1,000,000 put aside for retirement, let alone over $2 million.

The reality is that most people have insuffient retirement savings, although there are some solutions as you’ll read ahead. 

2. Popular Investments Yield Little

Additionally, most people aren’t getting anywhere near a 5% yield on their investments (as in the example above), particularly given the popularity of common stock index funds, such as the S&P 500. There are some index funds and ETF’s with higher yields, but they are lesser known and therefore less owned. 

The reality is, despite their popularity, there are more suitable income generating assets for living off investments. Examples are income focused funds, MLPs, REITs, and even physical real estate or small business, that can be owned, ideally, in addition to a more traditional stock and bond portfolio as addressed in more detail later in this psot. 

3. Traditional Retirement Planning 

Third, the norm in retirement planning is to make retirement account withdrawals to live on a set percent of your investment accounts. These withdrawals typically require dipping into more than just investment income for almost everyone. This is unless investors have made a deliberate effort to seek out and own higher yielding investments, or they have a huge amount of investment capital earning income making the income layer in their retirement savings large as explained more ahead.

As a result, capital gains and maybe even the amount you initially invested (AKA, your hard earned savings) are needed to live in retirement living for most people. This can work fine if you have saved a lot of money and are fine with spending your principle or capital gains. Generating income from investments, however, is ideal as explained more ahead. 

In order to make sense of all of this, I use the example of comparing your investment savings to a rich chocolate layer cake throughout this post.


Investment Income, Capital Gains and Savings

Investment income, capital gains, and invested capital can be thought of as different layers in your investment account. 

It’s important to understand these layers in determining how much money you need to live off investments now or at any time in the future. That’s because:

  • Money from 1 or more of the 3 layers fund your lifestyle when you’re living off investments
  • Good planning is necessary to reduce the probability you’ll run out of money in retirement
  • Steps can be taken to increase income from investments (or elsewhere) eliminating the need to continuously dip into savings layers, or rely on inconsistent capital gains.
  • These layers are at the foundation of living off investments and safely planning for your future

In this post, I’ll outline the difference between those three layers so you can see what your options are and how you might go about being able to live off investments at the age you choose. Like you may do, I equate “living off investments” to financial independence and/or retirement without financial struggle or worry.

Note that I’ll disregard other potential income sources, such as social security in this post, since many readers are younger than the most common retirement age of 63, just like we were when we began living off investments and alternative income streams. Also, many readers strategically choose to delay social security in order to obtain a higher social security payments later

Potential Income From Living Off Investments

Refer to the chart below with various scenarios for living of investments for this next section. 

Money Available for
Living Off Investments
Yield Investment
$2,400,000 5% $120,000 High Yield Assets
$1,000,000 3% $30,000 Dividend Stocks
$500,000 3% $15,000 Dividend Stocks
$1,000,000 7% $70,000 Alternative Investments
$1,000,000 10% $100,000 Covered Call Strategies

Using Account Size and Yield to Determine How Much Money You Need

When you’re considering how to live off investments, first, you’re faced with the decision of whether to live off income from investments only, as in the formula above, or spending your savings (investment capital) to live as also explained above and in more detail ahead.

Whether or not this is even an option depends on:

  1. How much money you have
  2. How much yield you earn on that money

For example, if you have $1,000,000 earning 3% from dividend stocks, this will generate $30,000 income a year before considering taxes or financial advisor fees if any.

If you have $500,000 earning 3% in dividends, the annual income generated will be $15,000 a year.

A 3% income yield from traditional stock and bond portfolios is realistic if not overly optimistic these days. 

This simple math is very telling. That’s because, in this example, we’re focusing on investment income only vs capital gains from your investments. Remember, capital gains are the increase in value your investments have had, if any, not the income they generate.

Most people who live off investments, however, don’t just rely on investment income because they can’t do so, even though many investors realize this would be true financial indepedence.

(STOP: If you’re confused so far, read my post How to Understand Your Investments. )

Next, let’s dig deeper into exactly what those layers of investment income, capital gains, and savings (or initial deposits) are.

how much money do you need to live off investments


Envision Layers of Money in Retirement Accounts

Even though it seems like your money is all lumped together in your investment accounts, think of your investments or retirement accounts in layers to differentiate truly living off investments vs withdrawing your investment capital.

Envision 3 wealth layers in your investment accounts, again, much like in that chocolate layer cake.

Account Layers for Living Off Investments

The chart below explains the layers that can be used when living off investments for traditional assets like stocks and bonds whether owned in a mutual fund, ETF, or as individual securities.   

Layer Origin
Income Stock Dividends, Bond Interest
Capital Gains Increase in Asset Price
Capital Initial Deposits into Account


Wealth Layer 1 – Investment Income Only

At the top layer of your investment accounts, you have dividend or other income, such as bond interest. Spending from here is literally “living off investments” since you’re using only the income that your investments generate for you.

Think of this as the very top layer of that cake which is made up of all chocolate. The top layer of icing is usually thinner than the other layers, but we all know it’s the best, richest part.

Much like the chocolate icing layer of cake, layer 1 is the most desirable way to live off investments. This is because you can leave past savings deposits invested in the account to continue to compound wealth, and not get stressed about capital gains with stocks going up and down all the time. 

Some people comment on my Retire Certain YouTube channel

  • You can’t take it with you!
  • I saved all this money and now I’m ready to spend it in retirement
  • We live cheap on $1,000 a month
  • I earn 10% a year from stock gains

That is all well and good, but:

  • There have been multi decade periods of poor stock performance that significantly decreased the longevity of investment accounts 
  • Not everyone wants to live off beans they canned two summers ago
  • Things (life) almost always costs more than we thought it would
  • Events outside our control greatly affect our finances and investments
  • It’s nice to be able to take trips, engage in the hobbies we enjoy, and do other things that cost money 

When your investment account generates all of at least some of the money you need to live off your investments from INCOME, it’s literally like having your cake and eating it, too.

It’s like getting a fork and scooping off that top layer of rich icing, but there’s a drawback. The drawback is that living off investment income only isn’t going to give most stock and bond investors much income to live on.

As you can see from the chart above, having enough to live well requires a very high amount of money in your investment accounts, high yield investments, or both to generate significant income. This issue has been compounded by the fact that real bonds yields are still relatively low if not negative.

Investment Yield and Account Size

As you can see from the formula and the two examples above for dividend income from $1,000,000 and $500,000, the amount of money, the types of investments you have, and the yield they earn determine how much money you need to live off your investments without running out of money eventually.

But if you can somehow live off the icing, or Level 1, you don’t even have to touch your savings.

This highly desirable scenario required a shift in thinking about retirement investing that hit us square in the face two decades ago! That led us to shift much of our retirement savings away from a traditional stock and bond portfolio based on standard asset allocation to focus on increasing income.

(In full disclosure: Years later after we established several income streams to cover the bills and often more, we circled back to generating more consistent short term capital gains. I did this with our stock, bond and commodity portfolio after evaluating strategies with 50 years of backtested data to create a portfolio via Allocate Smartly .) 

Higher Investment Yield Examples

In the examples below let’s vary the income/yield, and the amount of money in the investments to demonstrate the impact that improving the yield alone can have. Let’s also explore potential ways to live off investments with less savings since the higher the income less the less you need saved to live off investments

Again, remember, in this post we’re looking at income only, not capital gains. Doing so allows for the potential to live off investments while leaving the capital intact to compound, and/or use when you’re 80, not 55! I’m drilling this point repeatedly because it is a huge mental shift for most stock market investors, and one that must be embraced before understanding the risks from trying to live off investments. 

Plus investment income is more predictable and steady than capital gains, which are, unfortunately, but realistically, capital losses at times. 

1. High Yield Stock and Bond Investments 

For an investor with $1 million in higher yielding stocks and “slightly” alternative investments such as preferred stocks, higher dividend stocks, maybe some MLP’s or REIT’s with an overall 7% yield, annual income would be $70,000 a year.

Note that, of course, these assets would swing up and down in price, but so do all stocks and almost all bonds. 

2. Covered Calls Increase Stock Income

One often overlooked strategy for those looking to live off investments is covered calls selling where investors can significantly increase the income they get from stocks and ETF’s. Many more advanced investors, financial advisors, and funds sell covered calls since doing so can double to quadruple stock income and more while not increasing stock market risk.

The covered call process is fairly simple and can even be done inside most retirement accounts.

Selling out of the money covered calls, specifically, on long time stock holdings can provide an excellent source of mostly passive income. If done inside an IRA, it can be done without the risk of triggering capital gains on long term stock holdings if the call options get exercised.

Of course, the covered call income will be stuck inside the IRA but it can be coordinated with Required Minimum Distributions, when appropriate, as a solution.

Even if taxes are incurred, selling covered calls can usually make that top income layer over twice as thick when properly implemented

For example, 10% a year is an achievable yield from covered call income. On $1 million invested in stocks, the income would be a very respectable $100,000 a year.

Just remember, there are three major risks with covered calls:

  1. You will probably miss out on capital gains IF the stock price rises over the option strike price. (The call income, however, is a bird in the hand while the potential capital gain is in the bush.)
  2. Basic covered call strategies work best during sideways or rising markets, and not great in bear markets.
  3. Covered call selling is subject to stock market risk (which most investors already have anyway)
Yield from Alternative Investments and Strategies 

We’ve addressed increasing income for typical stock and bond investors. Let’s briefly look an example of an alternative income generating asset that I personally use and love. 

Real estate is a little more complicated due to financing, expenses, and tax benefits, but let’s take a simplified example to prove the point.

An investor with a million dollars in real estate rentals yielding 10% after expenses would make $100,000 a year in investment income. There are many potential scenarios involving financing and the amount of capital required to reach that income level as addressed in my owning a business vs real estate post. 

Higher Yield Impact

You’ve seen several ways that investment income can be increased. There are many more ways, but I write about what I am doing or have done, unlike many financial writers. 

Remember, the amount of investment income is a function of investment yield and the amount of money you have invested in income generating assets. We can simply shift the yield variable to have a meaningful impact on how much money you need to live off investments.    

The income impact of this can be comparable to the result from a decade or more of constant efforts to save money and invest it but it takes a lot less effort to increase yield than it does to save money for decades; been there and done both. 

The good thing is that while the amount of money invested, and the yield being earned, is not always completely under your control, it is certainly under your influence by becoming a more advanced investor and carefully selecting quality, higher yielding investments if you choose to live off investment income only (instead of spending down your savings).

The bottom line is proactive investors who choose to do so can usually get higher yields making it easier to live off investments with less money saved.

Now we’ve addressed:

  1. Why the investment yield is so important in determining how much money you need to live off investments.
  2. The rewarding but usually slim income layer of your investment accounts.

Next, let’s explore the next layer which can serve as an excellent retirement income source backup, AKA Plan B for at least some months.

Layer 2 – Income and Capital Gains

Let’s say that, like most investors, the income generated from your investments is not providing enough income to live. This means you’ll need to dip into the next layer.

In Layer 2, you’ll withdraw at least some capital gains (AKA growth) from investments. And this can work great for a lot of investors, especially during bull markets as seen in most of the 1990’s and the 2010’s decades. Unfortunately, the success of capital gains during bull markets leads many investors to think this is how investing in stocks always works, resulting in them thinking they need much less money than they actually do in order to live off investments. If only it were true. 

You’ll want to understand how the capital gain layer works in order to determine if you want to rely on capital gains (in addition to income) to get a good estimate of how much money you need to live off investments so you don’t:

  1. Spend too much of this important layer of your savings and eventually run out of money OR or, at the other extreme…
  2. Live too frugally to enjoy life

Referring to our layer cake example again, Level 2 is that rich creamy center. It’s not the bottom foundation layer (your initial deposits), but it’s not exactly the income layer either.

An ideal situation when living off investments is spending all the money from the top, or income layer first, then dipping into Layer 2 when needed, but maybe not consistently.

The longer you’ve been investing in assets that are increasing in price over your cost, the bigger layer 2 will be. A long term buy and hold stock investor that has been in the market for decades will more likely have accumulated and compounded capital gains. An investor that frequently buys and sells stocks probably won’t have many long term capital gains in their account, if any. 

So the type of investor you are will affect the size of your capital gain layer.  

As you may have experienced, it can take decades of discipline as well as favorable market and economic conditions to accomplish a big layer of capital gains, however, for buy and hold investors.

Again, remember that capital gains occur when you sell an investment for more than you paid for it. In other words, your investments have increased in price since you bought them.

For example, if you buy an investment for $100 a share and the value increased to $150 a share, you have a $50 capital gain from selling that investment.

Realized Vs Unrealized Capital Gains

It’s important to emphasize at this point if you sell the stock you’ve had a “realized capital gain”; you locked in that gain.

If you continue to hold the stock after it has increased in value, you have an “unrealized capital gain”, which can subsequently disappear if the price declines back below your cost.

Investors can look in their brokerage account and feel very financially secure after seeing how much their stocks have gone up in price. Selling investments is what locks in those gains, however, and most investors use a long term buy and hold strategy which doesn’t lock in gains when they occur. 

This dynamic makes capital gains tricky when it comes to living off stock investments. Capital gains are ever so wonderful, but they can disappear, be unreliable, and inconsistent at times, making it hard to live off capital gains only. 

Capital gains, can, however, provide a generous source of funds for many investors and retirees, during many years. 

Example of Living Off Income and Capital Gains

Let’s bring this home with an example of living off investment income with at least some capital gains added.

Say that you make $5,000 a month from stock dividends in your retirement savings account. Let’s also assume $5,000 is your usual monthly spending from your investments. In other words, you’re living off dividend stocks. (To keep it simple, let’s pretend the dividends are distributed evenly each month, which isn’t common in reality.)

Every year you take a nice trip. One month, you decide to take a trip to Europe with your entire family. If you’re like me, you’re flying with free miles and staying at some amazing inexpensive smaller inns and vineyards, so the trip cost is just $10,000 total.

You got the $5,000 dividend income which is already applied toward your usual monthly expenses that month. You look at your investments and see that you have some Apple stock which has increased in price over the years from your initial cost of $10,000 to a current value of $20,000. You decide to sell $10,000 worth of Apple stock.

As a result, you have a $10,000 (realized) capital gain in this example. Voila! You’ll use this money to fund your trip. In addition, you used $5,000 investment income to pay the usual bills at home that month.

Your total expenses of $15,000 that month came from both the usual dividend income and the Apple stock capital gain.

Using our cake analogy, you ate the chocolate on the top layer, and then you dipped into the creamy (capital gain) bit also that particular month to fund your trip to Europe. (Sounds delicious!)

In other words, you strategically capitalized on both your wealth building and income investing efforts to fund a wonderful month while completely living off investments. 

Capital Gains and Bear Markets

Bear markets are a very unpleasant and emotional reality for almost all stock investors, so next let’s address how bear markets affect someone trying to live off capital gains partially or entirely. 

No Capital Gains

There will almost certainly be occasional bear markets periods during which a retiree has no capital gains in the account and must sell investments at a loss in order to live. This is when living off investments at Layer 2 gets very tricky. Investment income, or Layer 1, lessens this risk

Fortunately, years of growth and compounding from both investment income and capital gains can and does often partially or fully remedy this situation. This will vary for each investor, depending on when they bought stocks, the stocks they bought, and the market conditions since they did so. 

Sequence of Returns Risk for Retirees

Studies show that if an investor experiences a bear market just before or after retirement, it can significantly decrease the probability of retirement money lasting for the planned retirement withdrawal period. This is such a real factor that it has a name, Sequence of Returns Risk. 

In other words, stock market cycles in the years both before and after retirement are super important. They are also, unfortunately, out of our control. They can also have a huge impact on capital gains, and much less of an impact on traditional investment income from interest and dividends. 

Defensive Assets as a Source of Capital Gains

When bear markets occur, and there are no stocks to sell for capital gains, a retiree can rely on “emergency” cash (money market). Alternatively, more advanced investors frequently own defensive investments that tend to go up during bear markets which can often be sold for capital gains during stock bear markets.

This is why it is so important to have diversification with a portion of net worth in assets that are non-correlated (move in opposite directions) to stocks to lower stock market risk especially when living off investments.

Income generating assets also act as a hedge during bear marekts since non dividend growth stocks and other income investments are hit the hardest during bear markets. One exception to this is usually high yielding and riskier investments, such as high yield corporate bonds.  

Next let’s look at Layer 3 of your investment accounts.

Layer 3 – Income, Capital Gains and Savings

Spending at the next, and last layer down includes spending your investment capital, or savings, in addition to spending income and capital gains. Here, you’re spending that hard earned money, bonus, or inheritance that you worked to put into your investment accounts.

In other words, referring to our delicious layer cake, you’re eating the chocolate icing layer at the top, the creamy bit in the middle and at least some of the bottom foundation layer of cake, too.

Ideally you won’t have to spend at this layer, at least not early in retirement. It’s best to save that foundation layer for later in life if your numbers indicate any chance of running out of money.

Despite all the focus in this post on income providing funds to live, the most popular and conventional plan for retirees to live off investments is with retirement withdrawals so let’s address that next.

Two More Investment Layers

There are two more layers that need to be addressed that are a part most investment accounts. I’ve touched on these I but want to expand on them. They are not clear layers like layers 1, 2, and 3, but they are super important to consider, especially if you’re trying to live off investments now or later.

Compounding Income and Gains

This “ingredient” is comingled into the existing layers. It can have a powerful effect on how much wealth you accumulate. It’s compounding.

The money earned from both investment income and gains compounds when it’s reinvested. Those living off investments may use the income and or the gains, however, to live rather than reinvesting it. The more money you spend, the less there is to compound, and the more money you invest, the more there is to compound.

You can think of compounding as the yeast in the flour that makes the cake magically rise. 

Compounding has a major impact on the passive growth of your investment accounts. It’s comingled into your other layers, and it builds wealth without work.

Make it a conscious decision as part of an overall wealth plan if you choose to live off income and or capital gains vs reinvesting them. 


This layer is sort of crazy, and it’s a layer I hadn’t given much thought to until recently.

Investment assets increase in price simply due to inflation. This is somewhat inconsequential since there is nothing you can do to control inflation. It’s important to realize this reality, however, because the increase in asset value due to inflation isn’t real.

Not only that, but investors end up having to pay taxes (and fees) on asset price increases due to inflation, unfortunately. Investors, however, are not getting the real benefit of this price increase because it’s not a real value increase. To add insult to injury, investor money has actually decreased in value by the amount of inflation. 

You’ll defintely want to consider inflation when estimating the amount you need to live off investments

What About Retirement Withdrawals? 

At this point, you may be wondering about the easy and typical retirement planning where retirees withdraw “income” each month to live from their retirement savings. Those withdrawals can and do often exceed Layer 1, or investment income, however, making them not really “income”. 

The systematic account withdrawal method is the staple of traditional retirement planning. You can see how it can be absolutely ideal for someone that clearly has enough retirement savings regardless of what the economy, interest rates, inflation, or stocks do. Making retirement withdrawals is a different but overlapping approach than living off investment income to delay, reduce or avoid spending down retirement savings as outlined in this post.

The focus of this post is taking money out of your investment account that has been put there primarily as a result of income vs making withdrawals from the account even when the account didn’t earn the money being withdrawn, and doing all this based on an estimate that the money will last as long as needed

Retirement Withdrawal Methods

Let’s address retirement withdrawals in a little more depth given their popularity. Note that the success of retirement withdrawals providing funds for life depends on the 3 layers that this posts addresses.

As you have seen, retirement withdrawals may come from Layer 1, 2, or 3 based on:

  • How your investments have performed since you retired
  • The investment yield you’re getting
  • How much investment savings you have

4% Retirement Withdrawal

The most popular and common retirement withdrawal method is to systematically withdraw 4% anually, adjusted (increased) for inflation, each year. This method has been very common since the 1990’s for retirees. Many trying to live off investments don’t realize interest rates were responsible for the success of this retirement strategy during much of the study period, thereby supporting 4% withdrawals.

In fact, low bond yields is only one of many reasons why the old retirement model of 4% withdrawals is less reliable than it was over two decades ago when it first became popular. It has remained very popular but the economic foundation has changed, and retirement planning hasn’t caught up with those changes yet

2% Retirement Withdrawal

Many view the 4% withdrawal rule as too aggressive. Concerns developed that a retiree withdrawing 4% may run out of retirement savings if there was another troubling decade like the 2000s decade. This would trigger Sequence of Returns Risk for many retirees, as covered earlier. 

This is because Layer 2 disappeared for many retirees in the 2000’s decade with the two devestating bear markets! And layer 1 was also negatively affected with a long term trend of declining interest rates in the 2000s and 2010 decades as addressed above.

As a result, withdrawals of 2% to 3% were suggested instead of 4%. Then, as is typical, after the bull markets of the 2010’s decade, financial experts began suggesting 4% withdrawals again, just when investors should be more cautious given the over priced assets at the time! 

This demonstrates that the safe withdrawal amount varies based on market trends during the time just before and after retirement, as well as the years when withdrawals are being made. The results of these studies must vary depending on the events of the financial markets and the economy during the study periods. 

This is another reason I like investment income to fund at least a good part of lifestyle expenses when living off investments. It’s also another reason I dislike cookie cutter rules and formulas since the macro economic environment strongly affects investment returns.

And investment returns (income AND capital gains) determine how much money you need to live off investments.  

How You Feel About Living off Investments from Income Vs Capital Gains Vs Savings

Let’s pull all this together with a summary so it makes sense. At the end of the day, you want to feel confident and good about living off your investments or you don’t really have financial independence.  

While all the money (dividends, capital gains, and capital) is lumped together in your account, when you think of living off investments in different layers, you’ll want to first see if you can live off investment income only.

This allows you to feel like you aren’t spending your hard earned money every time you pay bills since you’re truly not. You’re spending what your money is earning FOR you.

Otherwise, spending from your investment accounts can feel very scary and induce guilt.

At Layer 1, your money is working for you, and paying you income.

Again, the formula to calculate how much money you need to live off investments at Level 1 is simple as you saw earlier. You can estimate that now with your investments, or check the previous year’s brokerage statement from your investment accounts to see how much investment income you made last year, assuming interest rates and your investments have stayed about the same. 

At the next layer down, Layer 2, which includes capital gains, your money has also worked for you to make more money. For most people, spending at this layer is not quite as comfortable as spending from the income layer except for those with very high net worth.

But spending both income and capital gains, Level 1 and 2, can, however, can work if either the investment account has significant funds or if capital gains are consistent and above average. This emphasizes the importance of good investment returns and is another reason I use a portfolio I created in Allocate Smartly to invest based on 50 years of historical risk and return data. 

At the next spending layer, Layer 3, you’re spending your hard earned money, which is your capital. It’s your savings.

Spending savings feels scary for most people except those with very high net worth so their certain they won’t run out of money. 

Influencing Your Retirement Account Layers

The good thing is that you can increase the layers in your retirement accounts, especially the income layer, to affect if and how you can live off your investments.

The middle layer, capital gains, can take years to increase for most investors. Alternately, it can be done in shorter time frames by proactive investors who wish to make the effort as many of the Allocate Smartly strategies have demonstrated.

Remember, there are many factors beyond our control in creating capital gains, such as the economy and stock market cycles, and I love that Allocate Smartly works around this dimemna for us investors.

You control the bottom layer by saving more to invest over the years.

If you feel discouraged, know that your financial situation can be improved significantly by creating new skill based income streams, proactive investing or lifestyle changes, such as downsizing. In fact, we gradually completely replaced prior job income with our alternative income streams as explained in my related video below, Wealth Building After 50.




Opportunities to Live Off Investments

You may feel discouraged that you’ll never be able to live off investments. I understand as I’ve been there, but you can almost always control your ability to live off your investments.

As a society, we have been influenced to believe it’s someone else’s responsibility, such as the government, your financial advisor, or employer for you to be able to live off investments one day, which is simply “retirement” by another name. This mindset is leftover from the previous generation when corporations or the government often did provide more retirement funding, life spans were shorter, and bond yields were higher.

Now it is my responsibility, and your responsibility to be able to live once the steady paycheck ends. With this acceptance comes a plethora of options, available information, and alternative ways to live off investments easier than ever before in history.

All these options have created wonderful opportunities to fund your living expenses and build wealth where they simply didn’t exist for earlier generations. Just a few decades ago, there was only your employer controlled retirement account, maybe a stockbroker, and old news from paper publications for investors to build wealth.

Now, you can have state of the art investment research within a few seconds delivered by your choice of text, audio, or video. You can learn how to invest in anything, including how to invest in real estate rentals, sell covered calls or find quality high yielding stocks within a weekend.

And thinking a little more outside the box, if you’re short investment capital, you can create an online business for $25 that reaches a global market where you can sell your skills or products.

With this information comes the power to heavily influence your financial existence. The opportunities are here for almost anyone who wants to take them.

If the living off investment formula in paragraph one doesn’t allow you to live off investments as soon as you want, do something about it. Choose one or two opportunities to build wealth and/or generate income that align with your skills, resources, and lifestyle. Then go for it.

Living Expenses Are the Foundation for Living Off Investments

Thus far, I’ve focused on incoming vs outgoing money, or expenses. That’s where I prefer to focus because the upside is much bigger with generating income vs cutting expenses. Continuously cutting the budget has limited potential and, quite frankly, is no fun.

In our experience, increasing income streams has been very enjoyable.

It’s true that the amount of money you need to live off investments in the first place is a function of your lifestyle spending. This is why it makes sense to first clarify the lifestyle you really want, and how much money you’ll need to fund it, before you do any of the math.

This is where we start in my How to Retire When You Want course because sometimes, the life we really want costs much less than we thought, and sometimes more. It’s all about knowing what you want, what it cost, what you have, and what you can do with what you have to reach your financial goals


After considering the layer at which you’re comfortable spending, and playing with your numbers, you’ll have a better perspective for how much money you’ll need to live off your investments from the layer you choose.

Feeling pretty certain you have enough money to live off investments is true financial independence.

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Camille Gaines






The information on this website is for education only and is not to be construed as personal financial advice.