So I’ve been investing in VWRL for maybe 4 or 5 years now. Started small, kept adding every month, you know the drill. And I’ll be honest - at first I didn’t really care about the dividends. I was all about that total return number going up.

But somewhere along the way, something clicked for me. Those dividend payments hitting my account every few months? They started to matter. A lot, actually.

Most people in the FIRE community are obsessed with one thing: hitting that number. For me it’s €750k, then you withdraw 4% per year and supposedly you’re set for life. Which is fine, that’s the goal. But I realized there’s this whole other angle that doesn’t get talked about enough - actually getting cash without selling your shares.

Maybe it’s because I’m Italian and we have this annoying 26% tax on capital gains, I don’t know. But there’s something about dividend-paying ETFs that just makes more sense to me the closer I get to actually retiring early. They literally pay you. Every quarter. Every year. Whatever. You just… get money.

Anyway, let me explain what I mean, because I think this matters more than people realize.

Why dividends actually matter when you’re planning to retire early

So you reach FIRE and suddenly you need to start pulling money out. The classic advice is to sell 4% of your portfolio each year. But here’s what nobody really prepared me for: after spending 10, 15, 20 years buying shares… selling them just feels weird. Wrong, even. I wrote about this psychological challenge in my post about the FIRE paradox - it’s harder than people think to actually start spending after decades of saving.

Dividend-paying ETFs work differently. You’re not selling anything - you’re just taking the cash that companies are distributing anyway. Your portfolio keeps doing its thing (growing, hopefully), and you just collect the payments.

Take VWRL for example. It pays something like 1.4-1.8% in dividends each year. It’s not massive, but it’s real money. If you’ve got €500k invested, that’s between €7,000 and €9,000 a year in dividends. With our 26% tax in Italy, you end up with around €5,180-6,660 after taxes. Not enough to live on by itself, but it’s a foundation. And you didn’t touch a single share. If you’re wondering what €500k can actually get you in retirement, I wrote a whole post about that here.

The mental side of it

I think there’s a huge psychological difference between living on dividends versus selling shares. When you’re selling, you watch that portfolio number go down (even if it’s going back up faster than you’re withdrawing). With dividends, your portfolio can keep growing while you’re taking money out.

It’s almost like having rental properties that pay you monthly, except you don’t have to deal with broken boilers or difficult tenants - you just own tiny pieces of thousands of companies worldwide.

5 dividend ETFs worth looking at (all similar to VWRL)

VWRL is solid, don’t get me wrong. But what if you want higher yields? Or just want to diversify your dividend approach a bit? Here are 5 options I’ve been researching:

1. VHYL (Vanguard FTSE All-World High Dividend Yield UCITS ETF)

Yield: around 2.8-3%

This is basically VWRL’s high-dividend cousin. Same global coverage, but it focuses specifically on companies that pay good dividends.

The good part: way more cash flow. With €500k, you’re looking at €14,000-15,000 per year in dividends before taxes.

The tradeoff: higher dividends usually means slower growth. You’re swapping some capital appreciation for income.

2. VEUR (Vanguard FTSE Developed Europe UCITS ETF)

Yield: around 2.5-3%

This one focuses on developed European markets. If you want more exposure to European companies (which often have good dividend policies), this is a solid choice.

The good part: higher dividend yield than VWRL, and European companies tend to be dividend-focused. Good for diversifying away from US-heavy portfolios.

The tradeoff: you’re giving up global diversification - it’s Europe-only. Less exposure to US and emerging markets.

3. VVAL (Vanguard Global Value Factor UCITS ETF)

Yield: around 1.8-2%

This ETF focuses on value stocks globally, which tend to pay better dividends than growth stocks.

The good part: value stocks often have higher dividend yields, and you still get global diversification. Can be a good complement to VWRL.

The tradeoff: value investing can underperform growth during bull markets. The yield is decent but not as high as VHYL.

4. VUSA (Vanguard S&P 500 UCITS ETF)

Yield: roughly 1-1.2%

US-only. Just the S&P 500.

The good part: American companies generally have decent dividend policies, and if you believe in the US market, this is straightforward.

The tradeoff: you’re giving up diversification (it’s only US), and the yield is lower than VWRL.

5. VGWL (Vanguard Global Minimum Volatility UCITS ETF)

Yield: about 1.4-1.5%

This one focuses on global stocks that don’t jump around as much, and those tend to be decent dividend payers.

The good part: less volatility can help you sleep better during crashes, which matters a lot when you’re living off your portfolio.

The tradeoff: probably won’t do as well in crazy bull markets, but might hold up better when things go south. The dividend yield is similar to VWRL, so it’s not really a dividend-focused choice.

What I’m actually doing with my money

I’m not trying to be clever or anything, but here’s my current setup: about 80-90% in VWRL, and I’ve started putting 10-20% into VHYL to bump up my dividend income.

VWRL ETF portfolio allocation strategy

Why this mix? VWRL gives me the growth and diversification I want for the long term, but VHYL tops up my cash flow. When I finally reach FIRE, I’ll have:

  • Growth from VWRL (hopefully 6-7% annually)

  • Better dividends from VHYL (2.8-3% yield)

  • Combined dividend yield somewhere around 1.8-2.2% on the total portfolio

If I manage to hit €750k, that would mean €13,500-16,500 per year in dividends. After our Italian taxes at 26%, I’d have around €9,990-12,210. Still not quite enough to live on completely, but it’s a solid chunk. I’d only need to sell a bit more to cover what’s left.

Final thoughts

For me, dividend-paying ETFs aren’t just about the percentage yield. It’s about building something that actually generates cash flow. When you make the switch from accumulating to living off your portfolio, having that regular income coming in makes the whole thing feel less scary. This connects to what I wrote about in my post on choosing your FIRE type - different strategies work for different people, and dividend-focused investing is one approach that can make the transition to FIRE psychologically easier.

You’re not selling your shares. You’re just collecting what the companies pay out. It feels different - and honestly, it is different.

After 10 years of buying and accumulating, the thought of never having to sell sounds pretty good to me.