Warren Buffett wouldn’t worry about cash if he retired with just $1M — here’s why and how to copy his strategy
According to the Bloomberg Billionaires Index, legendary investor Warren Buffett is worth about $151 billion [1]. However, in a 2019 interview with Yahoo Finance [2], the Oracle of Omaha said he could live comfortably on much less. In fact, he estimated that he could live well even if he didn’t have 99.99% of his wealth.
“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’s Editor-in-Chief Andy Serwer.
In other words, the billionaire could live like a millionaire provided his portfolio generated at least 3% in steady and reliable dividend income. Unfortunately, a 3% or higher yield is looking increasingly rare in 2025.
If you’re trying to replicate Buffett’s dividend-focused approach, here’s what you need to know.
Buffett’s quote comes with a number of assumptions — such as having no mortgage, grown children 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 1.2% dividend yield [3] and the yield has been below 3% since the 2008 financial crisis.
Even the Vanguard High Dividend Yield ETF (VYM) currently offers an approximate 2.5% dividend yield [4].
The decline in average yields is a long-term trend, according to Deutsche Bank’s strategist Jim Reid. His analysis indicates that companies have been moving to buybacks instead of dividends for decades while 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 pick specific stocks, you could surpass this threshold.
Read more: Rich, young Americans are ditching stocks — here are the alternative assets they’re banking on instead
Even though achieving a 3% yearly dividend on a $1 million investment would be difficult, there are some strategies that might help you reach or exceed that threshold. Some ETFs have been constructed to focus on the ones with the best 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 and have relatively good finances. As of September, the fund’s top holdings include Exxon Mobil, Abbvie and Johnson & Johnson. The fund offers a 3.4% yield, which is slightly higher than Buffett’s benchmark [5]. If you invested $1 million in this fund, you could generate roughly $34,000 in passive income annually.
Alternatively, you could also deploy these funds into a 30-year U.S. treasury bond that currently offers a whopping yield over 4.9%. This is certainly the approach Buffett seems to be taking, given that his company owns $314 billion in T-bills, or roughly 5% of the entire T-bill market as of August [7].
If you’re looking for a higher yield, you could also target corporate bonds instead of the government ones. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) offers exposure to bonds issued by corporations like Transdigm and Iron Mountain. The fund’s current dividend yield is over 6.5% — nearly double Buffett’s benchmark [8]. If you placed $1 million in this corporate bond fund, you could generate roughly $63,000 a year in passive income. For some investors, that might be enough to consider retirement.
Buffett’s comment illustrates that retirement security isn’t about cash on hand alone, but also about having assets that can reliably generate income. While today’s yields make it tougher 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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[1]. Bloomberg. “Warren Buffett”
[2]. Yahoo Finance. “Warren Buffett shares his opinion on China, Costco, Elon Musk, College, and more”
[3]. Multpl. “S&P 500 Dividend Yield”
[4]. Vanguard. “Vanguard High Dividend Yield ETF”
[5]. iShares. “iShares Core High Dividend ETF”
[6]. CNBC. “U.S. 30 Year Treasury”
[7]. Berkshire Hathaway. “Form 10-Q”
[8]. [iShares]9https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf). “iShares iBoxx $ High Yield Corporate Bond ETF”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.