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50% Tax on Dividends

March 6, 2012 By E.J. Smith

Determining your income needs for retirement is no easy task. In terms of enjoyment, it is right up there with getting a root canal and filing your taxes. And at least with tax returns, there’s hope of a refund when you’re done.

Not so with retirement budgeting.

Once you have some figures laid out on paper, you get to present the budget to your spouse. That’s when you realize she actually was paying attention to you—and whatever toys you bought last year.

So you work through all that—the credit card bills and bank statements are marked and dog-eared—and it’s time to move forward. But wait: you both forgot about that trip to Disney. You already promised the grandkids you’d go. The new car can wait another year.

But it gets worse. Next year, the regime ends—you know, the tax regime. If Congress does what it’s known to do—nothing—then in 2013, taxpayers will pay their income rate on dividends. That’s a potential tripling of the current 15% rate.

The top rate for the “rich” (defined by President Obama as those earning $200,000 a year, or couples earning $250,000) will be 39.6%—add in the Obamacare tax of 3.8% and vanishing deductions, and you’re left with a 44.8% tax rate. Piling on state and local taxes where applicable means you’re looking at possibly 50% or higher. The “rich” will strive to make less.

That’s not exactly a formula for a thriving economy. Hold on to your dividend-paying stocks. They provide income—the cornerstone for any real-life budget.

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E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com

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