Entrep
30-04-2024, 12:27 PM
Was listening to this today https://www.nzherald.co.nz/business/cooking-the-books-podcast-the-truth-behind-building-passive-income-through-the-sharemarket/OJWXXGDXNRDUJOY5DPEXUQNBNY/ and the guy made an interesting point I would love to get feedback on from here.
He is from Kernel Wealth (https://kernelwealth.co.nz/) so obviously biased towards funds, but was saying that instead of owning a dividend stock where your capital might go more or less nowhere (thinking of something like SPK here), and you get your 5% or so yield each year fairly safely, why not invest in a PIE managed fund and (this next part is the key for me that I hadn't considered) withdraw 5% of that every year as your dividend.
That way, your "pseudo dividends" are untaxed (as capital gains) and also any dividends that get paid into the fund will be 28%.
Of course, the big thing is that your fund needs to return 5% or more each year, however that seems reasonably achievable, on average of course.
Anyway, it got me thinking, especially with reference to the likes of SPK, GNE, etc... you may get your 5-7% yield pretty comfortably, but your capital is going nowhere, and you're paying tax.
Instead, if you can invest in a PIE fund that returns at least 5% each year (on average) then you should be able to outperform a dividend stock very easily on the tax savings alone (no tax on capital gains) by withdrawing 5% out of the fund every year.
Or, you could also invest in something like IFT, instead of a PIE fund, and do the same thing very easily.
I guess, for me personally, looking at how retirement might look, I was only really considering dividend shares where I can get my safe 5% dividend payout each year. The above kind of opened my eyes though quite a bit, especially the 5% annual withdrawal tax free as a pseudo dividend.
Anyway, would love to hear other's opinions. Maybe everyone else knew this?
FYI I am just starting my journey now on how sustainable retirement might look.
Cheers
He is from Kernel Wealth (https://kernelwealth.co.nz/) so obviously biased towards funds, but was saying that instead of owning a dividend stock where your capital might go more or less nowhere (thinking of something like SPK here), and you get your 5% or so yield each year fairly safely, why not invest in a PIE managed fund and (this next part is the key for me that I hadn't considered) withdraw 5% of that every year as your dividend.
That way, your "pseudo dividends" are untaxed (as capital gains) and also any dividends that get paid into the fund will be 28%.
Of course, the big thing is that your fund needs to return 5% or more each year, however that seems reasonably achievable, on average of course.
Anyway, it got me thinking, especially with reference to the likes of SPK, GNE, etc... you may get your 5-7% yield pretty comfortably, but your capital is going nowhere, and you're paying tax.
Instead, if you can invest in a PIE fund that returns at least 5% each year (on average) then you should be able to outperform a dividend stock very easily on the tax savings alone (no tax on capital gains) by withdrawing 5% out of the fund every year.
Or, you could also invest in something like IFT, instead of a PIE fund, and do the same thing very easily.
I guess, for me personally, looking at how retirement might look, I was only really considering dividend shares where I can get my safe 5% dividend payout each year. The above kind of opened my eyes though quite a bit, especially the 5% annual withdrawal tax free as a pseudo dividend.
Anyway, would love to hear other's opinions. Maybe everyone else knew this?
FYI I am just starting my journey now on how sustainable retirement might look.
Cheers