For instance, my portfolio of dividend growth stocks and the mutual fund in my retirement account currently generate total annual dividends of $414.35. I view my dividend income with the perspective that I make $12.25 an hour at my current job including benefits. Over the course of a 40 hour workweek, my weekly income net of taxes is roughly $418.50 (without adjusting for an income tax return). This would equate to an hourly take home pay of $10.46. When dividing our $418.50 into $10.46 an hour, we arrive at 40 hours of pay from my day job.
For those wondering why I used my full dividend income in calculating how many hours of wages my dividend income is equivalent to, I did this because I pay no federal taxes on my dividends due to the current income bracket I am in. Also, I didn't deduct FICA taxes from my dividend income because dividends are not subject to FICA taxes. If one wanted to be very precise, they would have to factor in their state income tax liability on the dividends they received, in addition to adding their tax return into their weekly net pay to arrive at their net wage per hour, and accordingly calculate how many hours of labor their dividends equate to after taxes.
For the intent and purpose of this article, I am just trying to illustrate what my dividend income equates to in terms of hours/weeks of vacation per year. In summary, my current dividend income roughly matches what a week of vacation from my day job would amount to after taxes.
What is your current dividend income? How does that equate into terms of vacation pay for you? Did you have this perspective prior to reading?