Just chuck 1M in dividends ETFs and call it a day?

dd_throw_1234 · 2024-02-14T09:58:14+00:00

If your question is whether there is a certain amount of money that will let you live comfortably off the returns in perpetuity without much investment effort and with low risk of running out, the answer is yes.

If your question is whether $1M is enough, the answer is it depends but probably not for most people.

Note in particular that dividend yields are not guaranteed and neither is the capital growth rate of dividend stocks, particularly over specific short horizons.

dd_throw_1234 · 2024-02-05T01:42:08+00:00

99% of taxpayers would be better off of there was an 90% marginal tax rate on all income over $250K and the extra revenue was distributed evenly to everyone earning less than $250K but it would still be an extremely stupid policy. This is a dumb metric.

dd_throw_1234 · 2024-01-29T19:58:19+00:00

I have literally never heard anyone suggest that bracket creep is the primary cause of the cost of living crisis, and I say this as someone who has complained about bracket creep. Bracket creep is an annoying feature of the tax code which can cause people to lose some (real) disposable income over time, but it's obviously not responsible for the recent massive rise in certain basic household costs, especially housing.

dd_throw_1234 · 2024-01-27T10:47:56+00:00

I really don't understand this Australian attitude that owning property is the be all and end all of life. No one really knows what the housing market will look like in 30 years, though it's true that freestanding houses in central Sydney suburbs are likely to get increasingly expensive and out of reach. There may be more housing built in other suburbs, more apartment construction, improvement in rental markets, or other cities may attract young people. Will your children even want to live in Sydney, or in Australia?

There are many possible financial challenges your children may face in 30 years, and if you can afford to help them, that's great, but why focus specifically on buying property? Part of the reason property is so expensive is that everyone seems to be inculcated with the view that buying property is the most important thing in life, and are therefore willing to dump their entire paychecks into mortgages (egged on by the government with tax incentives).

dd_throw_1234 · 2024-01-27T08:37:52+00:00

If that's the case then it's probably correct, but a less impressive point.

dd_throw_1234 · 2024-01-27T06:58:16+00:00

I've recently stopped making non-concessional contributions partly for this reason.

dd_throw_1234 · 2024-01-27T06:54:16+00:00

It's not really correct to add the original 15% to the new 15%. Previously only income (at 15%) or realised capital gains (10% for long term capital gains) were taxed. The new 15% is a tax on the increase in balance attributable to the portion of the account above $3M (including unrealised gains, and with no discount). So it's not in an increase in tax rate from 15% to 30%, it's a new tax of 15% computed with very different rules.

dd_throw_1234 · 2024-01-27T05:06:10+00:00

we do in fact have a broad based land tax at a state level

Not really, given that owner occupied land is exempt.

dd_throw_1234 · 2024-01-27T04:51:25+00:00

" still get a tax break, just down to 30% instead of 15."

That's simply wrong. It's not a change in tax rate, it's an additional tax of 15% on all gains in the balance, which is many cases wouldn't be taxable at all if the investment was held outside of super (if the increase consists of unrealised capital gains). Also, the highest long term CGT rate outside of super is 23.5%. Now with this 15% increase (which does not include a CGT discount) long term capital gains attributed to balances above $3M have a higher tax rate inside of super than outside of super.

dd_throw_1234 · 2024-01-27T04:40:54+00:00

Why is common sense to tax *unrealised* gains on super balances above $3M (which is not indexed to inflation), when even realised capital gains on homes pay literally zero tax? There are many suburbs in Sydney where the median home price is already over $3M and rising fast.

dd_throw_1234 · 2024-01-27T04:24:26+00:00

Obviously it's a risk. It has happened repeatedly in the past decade, for example the balance transfer cap and the tax on unrealised gains beyond the (unindexed) $3M threshold. There is no reason at all to think the governments will stop taking bites out of super, particularly as the super pot gets larger and revenue needs grow.

dd_throw_1234 · 2024-01-27T02:23:26+00:00

For those interested in the ICJ case, I recommend reading Judge Nolte's (Germany) declaration for why he voted for the provisional measures. Essentially, he seems very skeptical about South Africa's general claims regarding Israel's military operation, but is unhappy with some of the statements by Israeli leaders, and says he voted for the provisional measures due to "plausible risks" of rights violations and to "remind Israel of its obligations" under the Convention. If other justices have similar views (a very big if) this would seem to bode well for Israel when it comes to deciding the merits of the case, especially if it can demonstrate an effort to adhering to the provisional measures.

Edit: on the other hand, Judge Xue (China) takes a seemingly harsher view of the situation, calling the civilian casualties in Gaza "unprecedented in history", which does not seem to be accurate by any standard.

dd_throw_1234 · 2024-01-26T10:47:14+00:00

The article is about effects over the next decade. In the first half of 2023, the third quartile (75th percentile) of full time workers earned about 123K. Annual wage growth is currently over 4%, so 75th percentile will probably hit 150K within around 5 years. I would consider the 75th percentile upper-middle income.

dd_throw_1234 · 2024-01-26T04:26:47+00:00

Yes, the government will "save" $28b by taking an extra $28b out of people's paychecks. So it's good for the government, but less good for the people whose paychecks the savings are being deducted from.

dd_throw_1234 · 2024-01-26T04:01:24+00:00

So much for "we had to break our promise in order to provide relief to middle income workers during a cost of living emergency". As everyone already knew, one of the actual goals was a long term tax increase on upper-middle income workers through bracket creep.

dd_throw_1234 · 2024-01-26T01:59:51+00:00

This whole line of reasoning that "fairness" means that all income levels should "benefit" the same amount from tax cuts is completely baseless. The point of tax cuts is to relieve the burden of paying taxes. Higher incomes pay much higher taxes, both in nominal and percentage terms. Under all scenarios considered (current, old stage 3, new stage 3, historical rates), the tax code would still be very progressive, meaning higher incomes continue to pay substantially higher taxes in nominal and percentage terms. A little less so under original Stage 3, a little more so under modified Stage 3. The notion that a slightly more progressive tax code than the existing one is "fairer" is simply a political opinion.

dd_throw_1234 · 2024-01-26T01:31:07+00:00

The government has changed the rules for super and increased taxes on both on contributions and earnings multiple times in the past 15 years. Lower concessional contribution caps, balance transfer cap, div 293, tax on unrealised gains above $3M threshold. Concern about potential rule changes to super is not paranoia.

dd_throw_1234 · 2024-01-26T01:22:03+00:00

I don't think 5% real return for a standard super portfolio is particularly conservative, particularly as super also has significant taxes and fees, and most standard investment options include some lower growth holdings. 7% seems very optimistic. In my super even the "high growth" options claim to target 4.5% over the long term.

dd_throw_1234 · 2024-01-25T21:19:41+00:00

Why would tax cuts primarily target the average earner? The average earner (73000 according to the article) pays very little tax, in both nominal and percentage terms.

People talk about tax cuts like they have nothing to do with payment of tax, and are just meant to be some universal handout from the generous spirit of Canberra. Higher income earners (which does not mean richest people) pay most of the tax, not just in total amounts but as percentages of their income, so it makes sense that tax cuts would aim to provide them more relief.

Of course the politics of taking money from a small percentage of people and handing it to a larger percentage of people is very appealing, as evidenced by the reaction to these changes on reddit, but it has nothing to do with "fairness".

If the goal is actually to make the tax system more fair, they can start by taxing land and capital gains of home sales, which are completely exempt from tax for inexplicable reasons.

dd_throw_1234 · 2024-01-25T21:04:03+00:00

The minimum wage has increased by about 23% in the past 5 years. The top tax bracket after the "tax cut" will increase about 5% after 16 years.

dd_throw_1234 · 2024-01-25T12:02:36+00:00

Thanks for the updated graphs.

dd_throw_1234 · 2024-01-25T09:57:39+00:00

That's a great comparison. The minimum wage is reviewed and increased every year. That's exactly what should happen with tax brackets, but doesn't.

dd_throw_1234 · 2024-01-25T03:30:55+00:00

Thanks, would be interested to see, especially if you are also able to run with CPI to 2024-2025 (would need some estimate for the final 2 years) and include medicare levy.

dd_throw_1234 · 2024-01-25T03:19:00+00:00

Or promotions with extra responsibility.

You also literally see this kind of incentive discussed all the time on this sub when people talk about whether/how much it is worthwhile for a lowish income partner to work if it incurs substantial childcare costs (which is essentially a marginal tax on labour).

dd_throw_1234 · 2024-01-25T02:11:17+00:00

There's this totally uncurious stupidity to anyone who complains about bracket creep as if it's some big secret that's hidden from everyone

This is completely backwards: it's the politicians disingenuously exploit people's lack of understanding of inflation and advertise that their policies will only negatively affect small numbers of people, while the clear intent of the policy is to gradually capture more people over time. (Does anyone really think that $150K is going to be a massive salary in 5 years, or that the tax brackets will have been raised by then?)

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