Should I keep investing in the VDHG ETF and aim to live off the dividends?

Is it realistic to keep investing and live off dividends? Yes.

As for what you invest in, that’s up to you. As David has said, you could consider super also as an option for extra cash.

The tricky part is you also need enough to live off before you can access super. That can be a combination of dividends and part-time work. The less you want to work, and the sooner you want to retire, the more you need to save and the more you’ll want to focus on assets outside super (or getting rid of a mortgage if you have one, which lowers your expenses + income needs)

So it all depends on how early you want to retire and how feasible that is based on your personal situation.

I’d suggest you still maximise contributions to super (in growth or higher) as this is taxed less on earnings inside super than VDHG in your own name. Your VDHG will be to fund from when you retire early until age 60 when you can convert your super into an income stream. So calculate back to get to the balance you need to support your desired retirement income from retirement to 60, and that probably will require selling some of the VDHG in addition to the distributions.

Remember the super income stream is tax free, but the income from VDHG is going to be taxed. Remember super has a effective maximums in terms of total balance at retirement (transfer balance cap), concessional contribution cap (for which you get a tax deduction) and also non-concessional cap, so if you are target to hit any of these redirect to your VDHG.

Hopefully you never have to worry about having to rely on the age pension as that is 7 years more and not a comfortable retirement amount.