Stop in for a cup of coffee
But...dividends are fully taxable at the full rate. Long term investment are taxed at a much lower rate. Making a regular dividend is a post retirement strategy when tax brackets are lower...not a sound investment plan pre-retirement when you are building your portfolio. Every good MBA knows that.
Actually that’s not entirely true.
Yes, they are taxable, but how they are taxed is varies. If you buy the lows, collect the dividends and then sell on short term gains like a lot of people do for whatever reason, yes, they are taxed at your annualized income rate or 22.8% whichever is higher.
However, if you buy and hold on to it for at least a 60 day period (90 days for certain stocks) your tax hit drops SUBSTANTIALLY. It’s called a qualified dividend at that point and is taxed as a capital gained. Just like any long term stock gain is... It’s driven by the dividend amount and your income bracket,
There’s only 3 tax brackets for qualified dividends to be taxed at. 0, 15 and 20 percent.
for me, I’ll be paying 15 percent and I have it figured in and have it already set aside out of each dividend already. That way the taxes are paid upfront vs in April. So yes, I’m losing 15 cents on every dollar and I would be not happy about it if I didn’t have multiple other investment accounts that are growing tax free. But 15 cents on every dollar is less than 22+ percent or 22 cents per dollar. So out of that 110 I’m getting right now per month, I’m giving $16.50 cents to the gov. I’m still netting 93.50 afterwards. And until I suddenly make 450,000 a year, it’ll stay at that 15 percent rate(or until they increase taxes).
Furthermore, that 15 percent bracket starts at a shade north of 40k AGI for a married couple and goes to north of 450,000. With my 401k savings, even if they average a modest 5 percent gain over the next 30 years, I’m gonna be pulling in about 68K just off my one 401k a year, not counting social security, my TSP or my pension from the Guard. So the tax rates really aren’t a giant difference now vs then unless the laws change in the next 30 years, which they could. Which odds are, taxes will be higher in 30 years than now, not lower. I’m expecting to be in a 22-25 percent income bracket when I retire.
even with the taxes figured in, IF this works the way it appears to be working, which I’m still skeptical of as a whole but looks solid enough, I potentially could retire as early as 43 making, after taxes mind you, what Im grossing now. but I’m gonna stick with it at least until I’m 50. Lord willing and the creek don’t rise. And if this continues to work the way it looks too. Lots of factors involved.
Course world events can and likely will affect it. But again, it’s one of several diversified strategies I have going.
and as any good MBA holder would do, you do your homework and have it critiqued extensively. these figures have been checked by 4 different independent sources including 1 each from Fidelity, Edward Jones, and Etrade plus an IRS treasury investigator.
There’s also plenty of available and highly credible calculators and programs that have been vetted by highly credible financial professionals that will confirm these figures.
Disclaimer: That said, everyone’s financial situation and strategies are different, your mileage may vary. Consult a licensed professional before making any investments.
