Interest On $1 Million-2013

You’d be surprised, but one of the biggest things that brings people to my site is my commentary on what the interest rate on $1 million would be.  So I figured I’d update everyone on what the current rates would be, since it’s one of my most popular posts.

At the time of writing of my post interest on a 5 year rolling CD with my credit union I would make $18,963 since a CD of that length had 1.88% interest.

The economy continues to suck, so we’re down to 1.50% percentage yield for a year (in case you didn’t know what APY meant).  That means with $1 million in a CD currently you would only get about $15,000 a year in dividends.  2 million dollars would get you $30,000, and five-million would net you a whopping $75,000 a year in dividends.

So, in the original post I talked about Elin Nordegren, Tiger Woods’ now ex-wife, buying a $12 million mansion and tearing it down because she won a divorce settlement of $100 million dollars.  In my example originally I figured she’d build an $18 million mansion in its place, leaving her with $70 million.  That would give her…$1,050,152 a year in dividends; that’s over a million dollars in dividends per year.

If you had the full hundred million you’d get a full million and a half, that’s $1,500,000 as year in dividends.

Lung cancer? That sounds like the kind of problem I can throw money at to fix!

Keep in mind in my regular savings account only has a 0.2% interest rate, so the same amount of money in my regular bank account gets me…

$1 Million: $2,002

$2 Million: $4,004

$5 Million: $10,009

$10 Million: $20,018

$70 Million: $140,128

$100 Million: $200,183

Just an update on the economy.  And a reminder of how I really wish I had about a hundred million dollars to live off of right now.

~RCS

We CAN Erase The Debt, Easily

You all know that I hate quoting myself, right?  Well I touched on a subject in my last post, but didn’t go really into depth with it.  Now I’m going into a deeper hole to mine some more information.  Follow along with me as I configure these numbers and come to the conclusion that…the nation is bought and owned by the wealthiest members of the nation.  And that there aren’t many ways to change it.

Here’s where the thought started in the last post to recap:

“And look at Republican Presidential Candidate Mitt Romney, who makes about $20,000 every 8 hours.  That’s equivalent to making $2,500 an hour if he worked 24 hours a day, 7 days a week, 365 days a year; that’s a grand total of $21.9 million a year in income.  He pays a little less than $3.3 million a year in taxes.  If he paid the same 22% that I do on my hard-earned money, that’d be a little more than $4.8 million.

And both Romney and my million-dollar CD only pay 15% taxes, whereas I pay closer 22% tax on the money I bust my ass for.  In other words, he pays a little less than $3.3 million a year in taxes.  If he paid the same 22% that I do on my hard-earned money, that’d be a little more than $4.8 million.  Whereas I pay a little more than $4,600 in taxes, but if I only paid 15% in taxes, I’d pay a little more than $3,100.”

Now if we follow along with those numbers…

And if we assume that all the .1% top income earners earn Romney’s amount and pay his level of taxes and that the lower 50% of the nation that make less than $26,000 a year all make the cut-off of 26k and pay my effective tax rate of 22% than we can look at the following results.

Top .1% Population: 300,000 people

Top .1% Income Gross: $6,570,000,000,000 (that is 6.57 trillion dollars)

Top .1% Tax Payment (at 15%): $985,500,000,000 (that is 985.5 billion dollars)

Bottom 50% Population: 150,000,000 people (that is 150 million)

Bottom 50% Income Gross: $3,900,000,000,000 (that is only 3.9 trillion dollars)

Bottom 50% Tax Payment (at 22%): $858,000,000,000 (yup, 858 billion dollars)

 

Now if we switch those tax rates around we find these numbers…

Top .1% Tax Payment (at 22%): $1,445,400,000,000 (a mighty 1.4 trillion dollars)

Bottom 50% Tax Payment (at 15%): $585,000,000,000 (still a comely 585 billion dollars)

So if we just switch the tax rates, we wind up with the top .1% paying 459.9 billion dollars a year more in taxes and the bottom 50% pays 127.5 billion dollars a year less.

In total that is an increase in $332.4 billion in taxes for the government.  In a period of 4 years we would increase tax revenue by more than $1.3 trillion dollars.

So if we can cut spending by 1.5 trillion dollars a year, that’d cut the budget deficit by 100 Billion dollars (i.e. .1 trillion dollars) a year, so after 4 years we would lower the national debt by 1.7 trillion dollars in 4 years just by making respectable cuts to the wasteful government spending and forcing 300 thousand people to pay the same tax rate as 150 million people who, combined, make less than the aforementioned 300 thousand people.

 

Now before you rant and rave at those numbers…keep in mind that we’re only looking at .1% against 50%.  If we look at Mitt Romney’s cronies among the top full 1% and realize that they must make around similar amounts as him.  So if we assume that the remainder of the top 1%, the other .9%, make marginally less than him we can create an even fancier number.

We’ll calculate it like this: We’ll assume that the top 1% makes, as a combined average, 20% less than Romney’s income per person.  That gives us the following numbers…

Top 1% Population: 3,000,000 (million) people

Top 1% Income Gross: $52,560,000,000,000 (that would be 52.6 trillion dollars a year)

Top 1% Tax Payment (at 22%): 7,884,000,000,000 (7.9 trillion dollars a year in taxes)

Top 1% Tax Payment (at 22%): $11,563,200,000,000 (yes…11.6 trillion dollars a year in tax income)

So if we raise effective taxes from 15% to 22% on the top 10%, using our numbers, we raise tax income (after accounting for lowering taxes on the bottom 50% from 22% to 15% tax) by $3,551,700,000,000.  In other words: 3.6 trillion dollars a year.

After 4 years, we’d have 14.4 trillion dollars a year, even without the spending cuts.  If we manage to cut spending by $1.5 trillion a year, we’d end up with $14.8 trillion dollars more than we get every year, now, in four years’ time.

So in the term of one single president, we could pay down over 97% of the national debt.  In the same president’s second term, we would erase the national debt in the first few months of his (or her) second term and by the end of the second term we would have a national surplus of 14.3 trillion dollars.

So in 8 years’ time we would not only erase the debt, but acquire a surplus almost equivalent to the debt as of writing this post ($15.2 trillion).

Now explain to me why we can’t have universal free health care and have this huge deficit, again?

~RCS

Living Off a Million Dollars

I talk off and on about the capability to live off a million dollars, which a lot of people tell me I am wrong about.  I like to respond that…I am not.  Without delving too deeply into my income I make between 20-25 thousand dollars a year, myself; depending on how much overtime I work.

Now if I switched to only working two days a week at my current job and rate, I would make about $8,000 a year.

So let’s look at what would happen if I went from working 40+ hours a week to working 16 hours a week, but had a million dollars in the bank.

I could place my million dollars into a 5-year CD (Certificate of Deposit) with my credit union which would bring an interest rate of 1.88% interest per year (the last time I bought a CD it had 3.30% interest; damn economy).  I could live off the dividends, which would equal out to $18,963.  So a million dollars only pays a thousand dollars or so less than I make working 5 days a week, every week, with no time off: Working 2,080 hours a year.

Keep in mind that million dollars’ interest would be $18,963 for 0 hours of work a year.  If I work 2 days a week and take no additional time off, that’s only 832 hours a year of work and I’d make a grand total of $26,963.

Amazing what a million dollars can do for you in a 5-year rolling CD.

Elin Nordegren, whom I recently spoke of buying a $12 million mansion and razing it, got $100 million from her divorce settlement.  So let’s take a look at what kind of money you could make, doing 0 hours of income-bearing work, and putting the entire $100 million in the same 5-year rolling CD I was just speaking of.

You’d make…$1.9 million a year in interest.  That’s right.  And you’d pay a lower tax rate on it than you did if you actually earned that money.

Let’s say that Nordegren builds an $18 million mansion where the $12 million one stood.  That will leave her with $70 million to put in the bank.  She would make…$1.3 million a year in interest.

And look at Republican Presidential Candidate Mitt Romney, who makes about $20,000 every 8 hours.  That’s equivalent to making $2,500 an hour if he worked 24 hours a day, 7 days a week, 365 days a year; that’s a grand total of $21.9 million a year in income.

And both Romney and my million-dollar CD only pay 15% taxes, whereas I pay closer 22% tax on the money I bust my ass for.  In other words, he pays a little less than $3.3 million a year in taxes.  If he paid the same 22% that I do on my hard-earned money, that’d be a little more than $4.8 million.  Whereas I pay a little more than $4,600 in taxes, but if I only paid 15% in taxes, I’d pay a little more than $3,100.

I’d love to have a million dollars or so, I’d never have to work again in my life if I didn’t want to.  Warren Buffett might be issuing challenges about donating money to the government in taxes; but I’ll challenge any wealthy person to disprove me by giving me a million dollars to try my theory out with.

If I can’t live as comfortably as I am now with just the interest from the million dollars they pony up, I’ll give the million dollars back.  If an independent source can vouch that my quality of life is on-par, or better, with me living just off the interest dividends then I get to keep the million.

I guarantee not a single millionaire/billionaire will take up my offer.

~RCS