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Strategies & Market Trends : Dividend investing for retirement

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To: sinclap who wrote (15079)	4/1/2013 12:31:29 PM
From: E_K_S	1 Recommendation Read Replies (1) of 34328

OT - How big of a Dividend Portfolio do you need to generate the same benefits of one Federal disability claimant? Answer: Total Capital needed to be invested in a taxable account: $488K ( Note: this is my estimate which I believe is based on some conservative assumptions; Assumes no increase in medical and/or dividend payments) and it's barley a living income! sinclap - I agree there are many claimant's that deserve their benefits and this program was designed for that. However, it's the increase in the marginal and/or non deserving claimants (especially the young) that need to be reviewed. According to the NPR program, several of the new claims are for younger (20-30 age) that have anxiety and or problematic mental/social problems (bi/polar). I am no expert but I suspect the representing lawyers found a new disability category that has gained traction receiving claim approval(s). I did a back of the envelope calculation to arrive at the necessary after tax capital to generate the income stream of benefits (both medical & monthly cash payments) provided to a typical claimant. Assume: (1) $1,000.00/month cash payment (2) cost of equivalent medical coverage through the public sector w/ same co-payments $500.00/month Note: This is barley a livable income and is in the "poverty" category. - Average annual dividend yield 4.5% - Federal marginal income Tax rate 15% - State marginal income Tax rate 2% After Tax Annual income needed: $18K (12K cash/$6K medical) equivalent monthly amount: $1,500.00 (I believe disability benefits are not taxed by Federal and/or State) After tax capital invested at 4.5% to generate income stream: $400K aprox Federal/State tax on generated income stream of $18K/year: $900.00/year Therefore, add $20K additional capital to generate revenue to pay annual Fed/State taxes. The equivalent "Before tax" Capital (This is the amount of savings one needs before tax to equal the necessary capital to generate the required annual income stream) = $468K Plus Capital needed to pay annual taxes = $20K --------------------------------------------------- Total Capital needed to be invested in a taxable account: $488K This assumes no increase/decrease in dividend amounts, companies remain profitable (no land mine explosions) etc.. The calculation also assume No Increase in the cost of annual medical care premiums too. If one earns $50K per year and is able to save 10% of their income, in 10 years you could build up the necessary capital ( $488K) to generate the equivalent monthly income stream that one disability claimant receives. The numbers are not small. According to the NPR program, there is no advocate for the "people" to argue against the claimant's case other than a review by a non bias judge. The claimant has their own lawyer. In Summary, we need the program(s) but I think we need better overview by the Fed's w/ "certain" termination dates for benefits for each claimant. Maybe even merge the program w/ the Veteran's programs (on average Veteran's cases are taking over 450 days to review according to 60 minutes - this is unacceptable!). There is not much discussion by Congress on either. EKS

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