Are you taking early retirement? Here is a smart investment strategy to consider | Personal finance

Let’s say you and your spouse earned $ 50,000 in dividends during your first year of early retirement. For 2021, joint filers can ignore taxes on eligible dividend income up to $ 80,800. This means that you can finance your lifestyle without the tax nuances getting bogged down. Typically, early retirees may not earn as much money as when they were working full time. This may work in your favor during tax season. When you exchange earned income for dividend income, you may be eligible to unlock eligible dividend tax rates for investments held in a taxable brokerage account. These rates – 0%, 15%, and 20% – are the same as the coveted rates of long-term capital gains.

Investing in dividends can do wonders for your portfolio if you are trying to retire early. This additional income stream can fill in the gaps to fund your lifestyle until your retirement benefits take effect. While you don’t need to dip into your dividend income as an early retiree, you can reap the benefits of dividends for the rest of your life.

A lifetime of benefits

As long as you are an investor and the board of directors of the company continues to declare dividends, you will continue to receive dividend income, even if you never buy another dividend paying company again.

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