Retire Early with ASX Dividends

It’s the Australian dream to finish work early and enjoy financial freedom after a strenuous-working career. Although the numbers really are not complex many struggle with the idea of financial independence being achievable. With that in mind, here are a few simple steps to retire early and live off your ASX dividend income.

Step 1. How much do I need to retire early?

Working out how much money you will need is the first step you need to take before you can seriously contemplate quitting the day job for the freedom of early retirement. The number will change depending on your desired lifestyle, travel plans and day to day expenses. A general rule of thumb is to estimate your retirement expenses as two-thirds of your current salary, but this will vary for everyone. 

Step 2. Organise your portfolio before you retire early

Once you’ve worked out your spending needs, you should ensure that your ASX portfolio is well-organised well before leaving your job. For example, if you know you will need $50,000 per year to spend, you need to make sure that your ASX dividends are yielding that amount. A $1 million ASX dividend portfolio divided between BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB) and Qantas Airways Ltd (ASX: QAN) would yield $52,500 per year at present.

Step 3. Give yourself a safety net

While your portfolio should cover your expenses, it’s a good idea to play it safe and be conservative once you retire early. A cash buffer with 2–3 years of spending or some freelance work can be great insurance if circumstances change.

The reality is that with the right portfolio, you can retire early with a strong ASX dividend income to support your lifestyle

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