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According to the Bloomberg Billionaires Index, legendary investor Warren Buffett is worth about $145 billion (1). However, in a 2019 interview with Yahoo Finance, the Oracle of Omaha said he could live comfortably on much less. In fact, he estimated that he could live well on 99.99% less wealth (2).
“If I were retired and I had a $1,000,000 portfolio of stocks paying me $30,000 a year in dividends, my children were grown, and the house was paid off, I wouldn’t worry too much about having a lot of cash around,” he told Yahoo Finance.
In other words, the now-retired billionaire could live like a millionaire — provided his portfolio generated at least 3% in steady and reliable dividend income.
Buffett continued to tout the value of this type of income in his 2023 letter to Berkshire Hathaway shareholders, describing consistently increasing dividends as the “secret sauce” behind the company’s significant gains (3).
Unfortunately, achieving even a 3% yield requires more effort than it once did.
If you’re trying to replicate Buffett’s dividend-focused approach, here’s what you need to know.
Buffett’s quote about retirement comes with a number of assumptions — such as having grown children, no mortgage and a portfolio reliably producing dividends. Those conditions may not reflect the financial reality for many Americans, which makes it harder to apply his scenario to the average household.
And even if it did apply to your situation, you probably haven’t seen a lucrative dividend yield in several years. The S&P 500 currently offers an approximate 1.1% dividend yield, and the yield has been below 3% since July 2009 (4). Even the Vanguard High Dividend Yield ETF (VYM) currently offers only about a 2.5% dividend yield (5).
The decline in average yields is not a new trend, according to the Deutsche Bank Research Institute (6). Their analysis indicates that companies have been moving to buybacks over dividends for decades, as the market has become more dominated by high-growth technology firms that prefer to reinvest much of their cash rather than give shareholders dividends.
Put simply, if you’re a passive investor, you probably can’t reach Buffett’s preferred yield of 3%. However, if you’re willing to diversify into other asset classes or do your own research, you might be able to surpass that threshold.
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While achieving a 3% yearly dividend on a $1 million investment could be difficult, there are some strategies that might help you reach or exceed that watermark. To hit this number, you’ll need to have the same sort of prescience as the Oracle of Omaha, or know exactly where to look — although there are some lower barriers of entry to cracking this problem.
Here are a few ways to approach achieving that 3% dividend yield.
As you’re looking for companies to invest in, you probably don’t want your cash to get complacent. That’s where high-yield accounts can help, and they can also serve as effective emergency funds thanks to their high liquidity.
A high-yield account like a Wealthfront Cash Account can be a great place to grow your emergency fund, offering both competitive interest rates and easy access to your cash when you need it.
A Wealthfront Cash Account currently offers a base variable APY of 3.30%, and new clients can get a 0.75% boost during their first three months on up to $150,000 for a total APY of 4.05%.
That’s more than 10 times the national deposit savings rate, according to the FDIC’s February report (7).
With no minimum balances or account fees, 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, balances of up to $8 million are insured by the FDIC through program banks.
As for ETFs, not all are made equal.
Some have been built to exclusively focus on stocks offering high yields. The iShares Core High Dividend ETF (HDV), for instance, is a fund that screens the S&P 500 for the top 75 companies that offer the best dividend yield with relatively good finances.
As of February, the fund’s top holdings include Exxon Mobil, Johnson & Johnson and Chevron. The fund offers a 3.2% yield, which is slightly higher than Buffett’s benchmark (8). If you invested $1 million in this fund, you could generate roughly $32,000 in passive income annually.
If you want to invest in lower-risk ETFs like the ones run by iShares, you could work with Acorns to build a diversified portfolio.
Signing up for Acorns takes just minutes. Just link your card and Acorns will round up each purchase to the nearest dollar, investing the difference.
You can invest in a dividend ETF with as little as $5, and if you sign up today, Acorns will add a $20 bonus to help you begin your investing journey.
If you want to ensure you’re maximizing your retirement contributions, it could pay to speak with a qualified financial advisor.
Research from Vanguard shows that working with a financial advisor can add about 3% to net returns over time (9), aligning with Buffett’s target yield. That difference can be substantial. For example, if you started with a $50,000 portfolio, professional guidance could give you more than $1.3 million in additional growth over 30 years, depending on market conditions and your investment strategy.
Finding the right advisor is simple with Advisor.com. Their platform connects you with licensed financial professionals in your area who can provide personalized guidance.
A professional advisor can also help you determine how many years you have left to invest before retirement and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio.
Schedule a free, no-obligation consultation today to find the right advisor for you.
If you’d rather do research yourself than work with an advisor, try to make sure you’re using trustworthy sources to make your investment decisions.
For instance, you could use Moby, an investment research platform launched by former hedge fund analysts, providing easy-to-understand investment advice. Every week, Moby rounds up its top three stock picks and delivers them straight to you — and without too much financial jargon.
So far, the platform has already helped over five million users uncover stocks before they deliver multibagger returns.
Moby’s success speaks for itself. The platform’s stock picks have outperformed the S&P 500 index by an average of 11.95% over the past four years.
And that’s on top of the S&P’s already consistent annualized returns — about 10.56% a year since the index’s 1957 inception (10).
Another solid investment that could help you make strides toward Buffett’s 3% yield? Commercial real estate, which has outperformed the S&P 500 over the long term (11).
In fact, rental properties have long been a proven source of steady, passive income for high-net-worth investors. However, the time, effort and costs involved in managing and maintaining multiple properties prevent many from investing. So unless you’re a hedge fund titan or an oil baron, you’ve likely been shut out of one of the most profitable corners of the market.
That’s where mogul comes in. This real estate investment platform offers fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.
Founded by former Goldman Sachs real estate investors, the mogul team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the usual cost.
Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10 to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Every investment is secured by real assets, not dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.
Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.
Beyond single-family rentals, multifamily and industrial rentals represent another excellent investment opportunity, as J.P Morgan reports they both have a strong outlook for 2026 (12).
If diversifying into multifamily and industrial rentals appeals to you, you could consider investing with Lightstone DIRECT, a new investing platform from the Lightstone Group, one of the largest private real estate companies in the country with over 25,000 multifamily units in its portfolio.
Since they eliminate intermediaries — brokers and crowdfunding middlemen — accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This streamlined model can help reduce fees while enhancing transparency and control.
And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone — a true partner — as Lightstone puts at least 20% of its own capital into every offering. All of Lightstone’s investment opportunities undergo a rigorous, multi-stage review before being approved by Lightstone’s Principals, including Founder David Lichtenstein.
How it works is simple: Just sign up with your email, and you can schedule a call with a capital formation expert to assess your investment opportunities. From here, all you have to do is verify your details to begin investing.
Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns across market cycles with a 27.6% historical net IRR and 2.54x historical net equity multiple on realized investments since 2004. All told, Lightstone has $12 billion in assets under management — including in industrial and commercial real estate.
As such, even if multifamily rentals don’t appeal to you, Lightstone could still serve you well as an investment vehicle for other real estate verticals.
Get started today with Lightstone DIRECT and invest alongside experienced professionals with skin in the game.
All in all, Buffett’s comment about retirement illustrates that retirement security isn’t just about cash on hand. It’s also about having income-generating assets.
While today’s stocks might mean you have to take on more risk to replicate Buffett’s hypothetical 3% return, understanding the trade-offs between dividends, bonds and other income-generating assets can help retirees and near-retirees think more realistically about what it takes to build financial stability.
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Bloomberg (1); Yahoo Finance (2); Berkshire Hathaway (3); Multpl (4); Morningstar (5), (8); Deutsche Bank Research Institute (6); FDIC (7); Vanguard (9); Investopedia (10), (11); J.P. Morgan (12)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.