Interesting, though maybe depressing, article...

[M Paquette]

Congratulations!!!

Heh. Nothing like putting a positive spin on pain, eh?

At least I still have a green light on retirement, according to FireCalc.

 

[Koolau]

The real world implications/impact of this article are limited for most. The reality of dramatically increasing taxes are not likely for mere mortals (i.e. those with incomes below $250,000).

Still, what is a worry for mere mortals is the potential enviroment of high inflation and low real returns.

I have to agree with the second part of your statement - that inflation/low returns are a real problem to us mere mortals. Unfortunately, if you run the numbers, penalizing (with excessive taxation) those who make over $250K doesn't get the gummint to where it needs to be, revenue wise. My assumption has always been that "We have met the rich and he is us!" i.e., if you have assets, the gummint needs 'em. If you have income, the gummint is gonna want a disproportionate share. The only folks who won't be hurt (any more than they already have been) is the "poor" since they will soon be the majority of voters if things continue in the way they appear to be heading. I have no crystal ball on this of course. Just my stupid opinion. YMMV as always.

 

[packrat44]

I'm at a loss as to how they are calculating this.

They must be using some pretty high level of portfolio turnover and unrealized capital gains.

Starting in the first year, their numbers say that the portfolio generates $3 million in gross returns. If half of that is capital gains and half is regular income, I figure that the portfolio nets a little over $2 million, minus the 900k living, leaving over $1.1 million to add to the portfolio.

In year two they will earn $3.1 million gross, net $2.1 million, minus the 945k living due to inflation, leaving a little bit more to the portfolio than the year before.

What am I missing?

Inflation at 5% will require $1.5M to be left with the initial $30M to keep the original buying power. If 100% of the $3M were taxed at 20% that would account for another $0.6M. With $2.1M used for inflation and taxes, the residual would be $0.9M. In your example where half the income is taxed at 20% and half at 45% ($0.3M + $0.75M) the total taxes would be $0.975M. This would leave "only" $0.525M for spending each year. Maybe the Ultra Rich do have it tough after all.

What I would really like to know is where I can safely receive a net of 5% after inflation on my entire portfolio. Secondly, where can I acquire $30M to start that venture.