2006 Passive Income Update
Yesterday, I got the last statement that concerns our 2006 passive income. It was from TreasuryDirect for our investment in 4-week T-Bills. Early in the week, I also received a statement from Buffalo Fund and it turned out that they also distributed capital gains in 2006. For us, we received about $827 in distribution.
Overall, 2006 is a good year in terms of passive incomes, which came from dividends and capitial gains from stocks and mutual funds, as well as interests earned from high-yield online savings accounts and Treasury bills.
| Category | Income |
| Mutual funds | $6,588.36 |
| Stocks | $1,145.84 |
| Savings | $2,396.12 |
In total, our passive income of 2006 is $10,130.32. However, since I don't have any data for 2005, there is no quantitative comparison on how exactly we did year over year. In any case, one thing is certain. As we kept adding shares to our mutual fund holdings, the distributions will be bigger and bigger every year.
Though I love to see the money being added to our nest eggs without having to lift a finger, what we eventually get will be much smaller since all these incomes were generated by assets held in taxable accounts (in contrast to tax deferred accounts like 401(k) and IRA). For dividends and long-term capital gains, we have to 15% federal income taxes; for interests and short-term gains, the tax rate will be the same as that of our ordinary income. Now I am evaluating our mutual fund holdings to reduce some overlaps due to asset class changes of some funds we own and hopefully to cut one or two funds which will help us lower the taxable income a little bit.
Apparently, I am not the only one that tracks passive income. 2million, The Dividend Guy and Lazy Man do as well as far as I know.
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8 Comments
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How much do you have invested?
1mil from millionster.com
To answer your question, we have about $260K invested in mutual funds, stocks, Treasury bills and savings account at the end of last month. Therefore the passive income counts about 4% of our taxable assets.
fyi. I dont ever write my full email unless I know someone because I don’t know how ppl store emails in their system, or where or how they display them, just an extra cautionary step when venturing my email into cyberspace.
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1mil
Not too shabby!!!
I’m envious of the passive income number. Your assets are definitely up there. I’m a little curious why the total of stocks, mutual funds, and treasury bills isn’t bringing in more than 4%. Seems like there’s some risk where you could put your money into some high yield bank account and get 4.5-5%. I though mutual funds and stocks did well for the most part this year, so I suspect that you didn’t lose money there.
Actually, the “passive income” are the distributions from stocks, mutual funds, and savings accounts. Those are the money that I indeed received in the past year and the price appreciation of mutual funds and stocks are not included because the gains are only on paper, not realized. If considering the price appreciation, the gain is much higher than 4%.
That makes perfect sense. I didn’t think about it in that way. Considering that, 4% is actually fairly impressive.
While 4% is quite good and I like it, all the gains are part of our taxable income and will increase the tax bill. I am considering whether I should reduce some holdings to actually lower the income. I am not sure if this is the right way to do. On on hand I like the money that are generated without too much effort, on the other, I don’t like pay big chuck of that money as taxes. That’s a dilemma I am facing.