Couple With $1.1 Million Seeks Passive Income To Retire By 40 – Reddit Explodes Over Portfolio Choices Like PLTR, AMD And Dividend Stocks

In an era when financial independence is more attainable than ever, the dream of retiring early has captured many people’s imagination.

With smartly allocated investments and discipline, many are already working toward a future where they can leave the 9-to-5 grind behind, travel the world and live off their investments.

The choices for strategies that build wealth are endless, from high-growth stocks like Palantir Technologies (PLTR) and Advanced Micro Devices (AMD) to stable dividend-paying stocks such as Realty Income (O) and Schwab U.S. Dividend Equity ETF (SCHD).

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One recent Reddit poster, a 34-year-old software developer married to another software professional, revealed his plan to retire by the time he’s 40. Living on a dual income with no children, the couple saves $5,500 monthly but expects the sum to dip to $3,000 as they want to start a family in the next three years.

“My plan is to be financially free at 40. Travel the world as much as possible. Get income in as many passive ways as possible. Don’t want to hassle with renters, side business, etc. I think dividends are the way?” the poster wrote.

With $1.1 million in liquid assets, including stocks, ETFs and bonds, the investor wants to rearrange his portfolio to generate a stable $5,000 per month in dividends.

He plans to allocate $200,000 to high-growth stocks like PLTR, SOFI and AMD, which he wants to sell once appreciated. His dividend investments – SCHD, DIVO and JEPI – are calculated to return $4,000, leaving him with a gap to close.

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With that in mind, the investor turned to Reddit to ask how to allocate his money to achieve his dreams while facing a 25% dividend tax in his country and possible market volatility.

Let’s dive into the advice Reddit investors have given him.

$1.1 Million Portfolio Allocation to Retire at 40: Investors on Reddit Advise

Optimize and Diversify Your Portfolio

Several commenters recommended the poster diversify his assets further and move away from risky growth stocks like PLTR, SOFI and AMD. Instead, they suggested dividend-paying ETFs, index funds or more stable stocks.

“I like the dividend options but would sell some PLTR, SOFI and AMD and buy QQQ instead. Just from a risk perspective,” a Redditor wrote.

One commenter touched on the diversification aspect of investing, suggesting the poster’s plan is unrealistic.

“Sounds like you're putting all your eggs into a few baskets and hoping for fantastic results. […] You need to do some serious realism checking on this plan of yours,” a commenter said.

Another mentioned the 25% dividend tax and suggested switching to index funds to reduce the tax burden.

“If you will be paying 25% tax on your dividends, you’d be better off not investing in dividend stocks at all. Just buy some index funds and sell small portions when you need the money. I think that way you will spend less on taxes (depending on how capital gains are taxed where you live),” the comment reads.

A Redditor suggested that the poster invest in a dividend-focused ETF since it’s diversified and offers reliable growth.

“Why not invest in a dividend ETF so it will grow too and is directly diversified?”

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Extend the Timeline of Your Retirement

Many Redditors suggested the investor’s retirement and wealth acquisition timeline is unrealistic, especially with plans for children and travel.

“Your portfolio will grow way faster if you compound the dividends back in. So if you can retire for life on $2 million-ish, that’s what you can probably hope for. Of course, by chance, it could be better or worse, so you might have to stick it out a few extra years, maybe not,” a comment reads.

One Reddit member thinks the poster will need to work until he’s 50 because the sum he’s thinking of isn’t big enough to sustain him and his family.

“You need to at least work until 50, bro. $1.1 million isn't enough for 40. Reinvest all your dividends for 10 years,” he said.

Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

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