How much would someone need to invest in the stock market to withdraw and live from passive income?

Some people dream of leaving the job and simply living the dividends of investments in the stock market.

For others, that is a reality.

So how much would someone need to invest to leave work and live on their dividends?

Establish a financial objective

The answer will depend on the needs and lifestyle of the specific investor.

For example, someone who withdraws young people with an active social life and fond of exotic trips may have very different requirements for someone who retires at a more advanced age with a modest lifestyle and few spending commitments.

In this example, to maintain simple things, let's use the amount of £ 286 per week that the government identified as the average weekly income of 2023 for single pensioners (remarkably higher than the figure of £ 259 for single pensioners).

£ 286 per week is equivalent to approximately £ 14,900 per year, so let's say £ 15k.

If investing with an average dividend yield of, for example, 7%, that would take an investment of £ 214,300 In the stock market.

Thinking about risks

But that might not be enough in practice.

Retirement can last decades. It is likely that some years bring unforeseen sudden expenses. Inflation will almost definitely mean that, a few years, much less within a few decades, the purchasing power of £ 286 will be less than today.

Dividend growth could be a solution to that (some actions such as National grid Try to grow your annual dividend according to inflation) but, as with anywhere, dividends are never guaranteed.

If I threw a dart to Ftse 100I would say that it is more likely that the sharing that hits reduces its dividend in the next 30 years than the life costs of retirees.

So diversifying the criticism of the portfolio from a risk management perspective. Ideally, I think that an intelligent investor will have an emergency money or financial security money to help deal with the unexpected challenges of life and the corrosive financial effect of inflation.

Adopting a staged approach

In addition to that, at least, putting £ 214,300 in the stock market today could do the trick.

But it is also possible to point to early retirement by building a pot in the stock market over time, even from a permanent beginning.

For example, put £ 100 every week in the market and aggravate it at 7% per year, an inverter could have a personal pension (SIPP) inverted (SIPP) or ISA shares and actions that are worth more than £ 214,300K in just two decades.

An action to consider

I think that a well -name market name that investors who observe such a approach should consider is Legal and general (LSE: LGEN).

It produces 8.6% and plans to continue increasing its dividend annually, as is done in recent years.

The company has a large and resistant target market in which it can compete with its well -known market experience and its market experience. Its large customer base and their proven cash generation capabilities attract me.

The FTSE 100 company has reduced its payment per share in the past. A recently announced plan to sell an US business. Ultimately runs the risk of a long -term dividend per share once the income of the initial sale has been distributed.

But I still maintain legal and general actions for the reasons I described above. As part of a diversified portfolio large enough, it could help an investor to aim early.