“But $100k won’t be enough in ten years!” I hear you say. Ok, let’s give ourselves a 10% pay-rise every 10 years.
Year Range,Annual Withdrawal,Year-End Balance (End of Decade)
Years 1–10,"$100,000.00","$3,566,005"
Years 11–20,"$110,000.00","$4,355,900"
Years 21–30,"$121,000.00","$5,497,281"
Years 31–40,"$133,100.00","$7,196,668"
With a starting fund of $3m, and a 10% payrise every decade, after 40 years we have over $7m in our super fund. Now, what happens to our poor rich person who needs to pay 30% on growth above $3m?
But I’m more concerned about poor suckers like me and maybe you.
Your key assumption is that the asset value never goes down. And you are ignoring the impact of inflation.
We are looking at long terms here, and when and where things happen matters.
So, in the case of a ‘comfortable’ $800K (lol i wish). Well, if the market tanks, that could easily be 400K. Not so comfortable now? And the $50K a year you were taking out, maybe you have to halve that to make it last. Oh, and whatever you were drawing out? $50K in 10 years time, assuming 4% inflation, is only worth 2/3 of whatever you take out today. And if you start budgetting for increased health care and aged care as you grow older, well…
Even this has a large dose of ‘assumes the status quo’ in it
This article is discussing a tax on earnings in super funds above $3m.
I think that people who are earning more than my annual salary just from growth in the value on their pile of cash should be charged tax on that growth.
They can afford it better than any of us, and I’m always amazed at people who think this is a bad thing.
None of the present changes apply to your examples.
Perhaps that’s the answer to my question: people criticise this tax because they worry it’ll affect them?
With $3m in super, you could draw $100k/year and assuming 5% growth you’d have over $3.5m after 10 years:
Year,Starting Balance,Withdrawal,Interest Earned (5%),Year-End Balance 1,"$3,000,000","−$100,000","+$145,000","$3,045,000" 2,"$3,045,000","−$100,000","+$147,250","$3,092,250" 3,"$3,092,250","−$100,000","+$149,613","$3,141,863" 4,"$3,141,863","−$100,000","+$152,093","$3,193,956" 5,"$3,193,956","−$100,000","+$154,698","$3,248,653" 6,"$3,248,653","−$100,000","+$157,433","$3,306,086" 7,"$3,306,086","−$100,000","+$160,304","$3,366,390" 8,"$3,366,390","−$100,000","+$163,320","$3,429,710" 9,"$3,429,710","−$100,000","+$166,485","$3,496,195" 10,"$3,496,195","−$100,000","+$169,810","$3,566,005"“But $100k won’t be enough in ten years!” I hear you say. Ok, let’s give ourselves a 10% pay-rise every 10 years.
Year Range,Annual Withdrawal,Year-End Balance (End of Decade) Years 1–10,"$100,000.00","$3,566,005" Years 11–20,"$110,000.00","$4,355,900" Years 21–30,"$121,000.00","$5,497,281" Years 31–40,"$133,100.00","$7,196,668"With a starting fund of $3m, and a 10% payrise every decade, after 40 years we have over $7m in our super fund. Now, what happens to our poor rich person who needs to pay 30% on growth above $3m?
Year,Annual Withdrawal,Ending Balance,Annual Tax Paid 1,"$100,000","$3,045,000",$0 10,"$110,000","$3,472,749","~$6,144" 20,"$133,100","$3,871,911","~$12,048" 30,"$161,051","$4,110,378","~$15,716" 40,"$194,872","**$4,052,857**","~$15,271"Instead of ending up with $7m after 40 years, this poor individual now only has $4m after 40 years.
As I said, I really wish I had this problem!
Sure $3M would be a nice ‘problem’.
But I’m more concerned about poor suckers like me and maybe you.
Your key assumption is that the asset value never goes down. And you are ignoring the impact of inflation.
We are looking at long terms here, and when and where things happen matters.
So, in the case of a ‘comfortable’ $800K (lol i wish). Well, if the market tanks, that could easily be 400K. Not so comfortable now? And the $50K a year you were taking out, maybe you have to halve that to make it last. Oh, and whatever you were drawing out? $50K in 10 years time, assuming 4% inflation, is only worth 2/3 of whatever you take out today. And if you start budgetting for increased health care and aged care as you grow older, well…
Even this has a large dose of ‘assumes the status quo’ in it
This article is discussing a tax on earnings in super funds above $3m.
I think that people who are earning more than my annual salary just from growth in the value on their pile of cash should be charged tax on that growth.
They can afford it better than any of us, and I’m always amazed at people who think this is a bad thing.
None of the present changes apply to your examples.
Perhaps that’s the answer to my question: people criticise this tax because they worry it’ll affect them?