I have not seen an IPS question of this nature, but just curious as to how people would respond to it. Lets say an individual’s spending requirement is $100,000 and the individual’s investment account totals $1million. The individual is taxed 30% on investment income (including bond interest and stock dividends) and 15% on ‘realized’ capital gains. If we are asked for the pre-tax return requirement, how would one go about figuring such a thing out? Or would CFA simply not ask a question like this?
You would specify answer for both tax rates, or as min/max, and maybe give a baseline 50/50 split div/cap gains #.
I don’t think they’d ask. It’s too complex mixing the tax rates.