Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Do you spend dividends in taxable accounts or reinvest
Old 12-13-2015, 06:43 PM   #1
Recycles dryer sheets
Quantum Sufficit's Avatar
 
Join Date: Jan 2011
Posts: 88
Do you spend dividends in taxable accounts or reinvest

Hi,

We retired in march of this year. Our luck would have the market falter but fortunately, despite building a new house and outfitting it, I was able to live on only a 9k draw from short term bonds because of other income. I would think it advantageous to reinvest dividends in a taxable acct as they are qualified dividends (vanguard total stock) and should incur a 0% tax rate. I would gladly take them as cash and spend if the market was up from our cost basis but alas, it is not. Therefore, why not reinvest the dividends and draw down more from short term bonds? (ie, spend from what has done the best this year?)

Thanks.
__________________

__________________
Quantum Sufficit is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-13-2015, 07:03 PM   #2
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 1,177
IMO, reinvesting dividends is a good idea. I have been doing all my investing life. The power of compounding is awesome
__________________

__________________
Souschef is offline   Reply With Quote
Old 12-13-2015, 07:05 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Vanguard Total Stock this year is only 95% qualified dividends. Large-cap index is 100% qualified dividends.

But why have any bonds in a taxable accounts? That's generally not tax-efficient. So look at the big overall pictures. If your bonds were in tax-advantaged accounts, you could spend the stock dividends and even sell stock held long-term to get the 0% LTCG tax rate. If your asset allocation was messed up by selling too much stock, then exchange from bonds to stocks in your tax-advantaged account.

So tax-efficient equities in a taxable account can be tax-free. It is like having more money in your Roth IRA when it is done right.
__________________
LOL! is offline   Reply With Quote
Old 12-13-2015, 07:17 PM   #4
Thinks s/he gets paid by the post
Car-Guy's Avatar
 
Join Date: Aug 2013
Location: Citizen of Texas
Posts: 2,470
Burns a hold in my pocket. Dividends are deposited into my checking account and just "go" for "whatever". Just another source of cash flow. I only know how much my dividends add up to when I do my taxes the following year.
__________________
Car-Guy is offline   Reply With Quote
Old 12-13-2015, 07:32 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: No. California
Posts: 1,600
I take all my dividends. Between those, SS and pensions, I have enough to leave my investments alone. However at some point I may start taking up to 4% each year, though right now I don't know what I would spend the money one yet.
__________________
KB is offline   Reply With Quote
Old 12-13-2015, 07:32 PM   #6
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 924
Quote:
Originally Posted by Souschef View Post
IMO, reinvesting dividends is a good idea. I have been doing all my investing life. The power of compounding is awesome
I reinvested dividends all my (accumulation) investing life, also. Now, in the decumulation(?) phase, I take the cash.
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 12-13-2015, 07:33 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,173
Reinvesting dividends is no different than taking the cash and immediately rebuying, only it is done a day or two more quickly if you do it automatically. There is no tax advantage to reinvesting. You report the dividend income no matter what, at 0% or 15% depending on your bracket. Whether you reinvest has no bearing on the taxes.

If you want to rebuy what you're getting dividends on, reinvesting is fine. If you want the flexibility to invest in whatever you want, or spend that cash and hold other investments, don't reinvest. I like the flexibility. If I really want more of the fund that gave dividends, I can rebalance.

It really doesn't matter that much. If you reinvest but decide that's not what you really wanted to do, you can quickly sell (with SpecID basis) and probably have very little short term gain or less.

I just prefer to keep it simple. I need a certain amount of cash throughout the year. I can get much of it with the dividends. Then I look at how I want my investments to be, and rebalance if needed.

I don't quite get the last sentence in the OP's post. Were short term bonds actually the best investment this year?
__________________
RunningBum is offline   Reply With Quote
Old 12-13-2015, 07:52 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,656
I don't auto reinvest any distribution in taxable accounts, but do in most cases in tax free or deferred accounts. That doesn't mean I spend the distributions. Most are reinvested as part of re-balancing or in new investments.
In retirement you do have to get your spending cash from somewhere. If you have a pension or are taking SS...that might do it. For people like me (too young for SS and no pension), we take it from cash or distributions.
But in retirement some of the rules may change for some. Assume you have no income source, so you take from cash, distributions or selling assets. Assuming taxes being filed MFJ with $2MM distributing 2% would give us $40k. With MFJ there is about $20k between the standard deduction and exemptions. What this means is that you can handle some bond or non-qualified distributions as you can offset at least $20k.

I would suggest validating the standard rules based on your own situation as to where different assets belong.
To auto reinvest or to just invest distributions based on other factors (like re-balancing) is a matter of choice.
__________________
bingybear is offline   Reply With Quote
Old 12-13-2015, 07:53 PM   #9
Recycles dryer sheets
 
Join Date: Nov 2014
Posts: 381
I reinvest - automatically.


Sent from my iPad using Early Retirement Forum
__________________
big-papa is offline   Reply With Quote
Old 12-13-2015, 07:54 PM   #10
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
In my taxable accounts, I take dividends in cash. I use them for rebalancing and living expenses.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 12-13-2015, 08:02 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by W2R View Post
In my taxable accounts, I take dividends in cash. I use them for rebalancing and living expenses.
Same here.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 12-13-2015, 08:16 PM   #12
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,230
Quote:
Originally Posted by gcgang View Post
I reinvested dividends all my (accumulation) investing life, also. Now, in the decumulation(?) phase, I take the cash.
+1. Those dividends are my paycheck!
__________________
FIRE'D in July 2009 at 51...Never look back!
RockyMtn is offline   Reply With Quote
Old 12-13-2015, 08:24 PM   #13
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 2,930
Reinvest. I'm in a process of shifting some funds in taxable account that pay high dividend to Roth IRA.


Sent from my iPad using Early Retirement Forum
__________________
When I post IIRC, that means going by memory. Google is your friend for facts. Stop being a lazy bum, I can't do all the googling for you. I'm lazy too. LOL
Fedup is offline   Reply With Quote
Old 12-13-2015, 08:52 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,376
I let it build up in my money market and then I find something else to buy.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 12-13-2015, 09:13 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,859
I take dividends as cash if they are going to be used to pay my expenses. Otherwise I reinvest them. Pretty simple.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 12-13-2015, 09:37 PM   #16
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 484
I've been re-investing for the last decade, but thinking this year I may switch a few to cash to help pay the tax bill. Seems easier than worrying about what to sell.
__________________
karen1972 is offline   Reply With Quote
Old 12-13-2015, 09:56 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Posts: 1,648
I don't reinvest either and allow the dividends to go to the cash account. I use it to buy other positions or more of the same if I chose to do so. I have not started taking them as cash to bolster my living expenses….yet.
__________________
sheehs1 is offline   Reply With Quote
Old 12-13-2015, 10:01 PM   #18
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,085
Now that we are in draw-down I use the dividends in the taxable accounts for expenses.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 12-13-2015, 10:02 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,411
When I was working I reinvested. Once I retired I take them in cash.. in effect the reduce my withdrawals since what we need exceeds our dividends.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 12-13-2015, 10:37 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,904
Quote:
Originally Posted by pb4uski View Post
When I was working I reinvested. Once I retired I take them in cash.. in effect the reduce my withdrawals since what we need exceeds our dividends.
+ 1 Same here
__________________

__________________
ejman is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Do you take LongTerm & Short Term Capital gains or Reinvest? rsingh6675 Stock Picking and Market Strategy 26 09-08-2015 03:33 PM
Dividends and CG: Reinvest or Distribute? Looking4Ward FIRE and Money 23 05-18-2014 01:22 PM
When in dist. mode- reinvest div & int & sell shares or take div & int in cash? cashflo2u2 FIRE and Money 12 12-11-2008 04:25 PM
AA & withdrawals between taxable and non taxable accounts. ron244 FIRE and Money 14 05-18-2007 06:59 PM
Mutual fund: better to reinvest cap gains/dividend soupcxan FIRE and Money 4 11-08-2004 01:00 PM

 

 
All times are GMT -6. The time now is 01:28 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.