How many Lloyd's shares should I buy to quit my job and retire on income?

Lloyds (LSE: LLOY) shares take center stage in my self-invested pension (SIPP) and I don't expect that to change. I hope to hold them for a lifetime.

I can't guarantee that will happen. Even tough green chips like Lloyds can fall. It would have come in less during the financial crisis, if taxpayers hadn't stepped in with £20.3bn.

Today, it's a modest home business, specializing in personal and small business banking. But what is lost in excitement, gained in honesty.

FTSE 100 dividend star

That hasn't stopped shares from rising 38.58% over the past 12 months. It paid a dividend of 4.73%.

Holding Lloyds shares is riskier than sticking money in the bank. My capital is falling instead of growing. Benefits are also not guaranteed. Both depend on Lloyds making a profit and keeping cash flowing.

Lloyds is connected to the UK economy and right now things are looking up. GDP grew by 1.3% in the first half of this year. The Bank of England has cut interest rates once, and may cut them twice in 2024.

Low prices will be a mixed bag for Lloyds. On the other hand, they have to revive the housing market. Lloyds is the UK's biggest lender, so this can be a real help. But there could be a downside.

Falling interest rates will apply to interest income, the difference between what Lloyds pays for savings and charges borrowers. The squeezing has begun. First half results published on 25 July showed a reduction in rates from 3.18% to 2.94%. Profit fell by 14% to £3.2bn. High operating costs didn't help.

For the full year 2023, Lloyds paid a total dividend of 2.76 000 000 000 %. That is expected to reach 3.1p by 2024, an increase of 12.4%.

Blue-chip growth

Let's say I've had enough of working and I want to retire. According to the Pensions and Lifetime Savings Association, a single person needs £31,300 a year to have a 'moderate' income in retirement. I'm single, but let's keep this simple.

I am on track to receive the new full State Pension, worth £11,502. That leaves me needing a further £19,798.

To generate that much from Lloyds alone, I would need to buy 638,645 shares (based on a forecast dividend of 3.1p per share). At today's rate of 58.34p, that would cost me £372,585. Which, oddly enough, I don't have to deliver right now.

Even if I did, I wouldn't put it in one stock, not even one as strong as Lloyds. I would like to supplement the income it pays with a few high yielding stocks. If my overall portfolio yields 6%, I will get the same income of £19,798 out of £329,967. That's £42,618 less. Any increase in share price will be more than that.

My salary should increase over time as companies increase their dividends.

This gives me an indication of the size of the pot I need to fund a decent retirement income from FTSE 100 shares. I'm not there yet, but I should be when I retire. And my Lloyds shares have an important role to play.