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Shutting off reinvesting Dividends in taxable account
Old 01-07-2016, 06:40 AM   #1
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Shutting off reinvesting Dividends in taxable account

Here is the story: My wife is retiring this year. I am already retired. I think we will be able to live off of muni bond income as well as 2% dividends from my taxable equity accounts. As such, I shut off dividend reinvesting in my taxable equity funds and directed these payments to a MM account.

If my muni bond income and the dividends from the equity funds are not enough to meet expenses .....I plan to sell what I need from the equity funds in taxable. This way I could also tax loss harvest to prevent capital gains in these accounts. This will also help manipulate taxable income as we will apply for an ACA health care plan this year. My question is:
Is this what the rest of you do when you shut off reinvesting the div and/or cap gain distributions in your taxable equity funds and redirect those payments to cash? If you fall short to meet expenses, do you then sell whatever else you need from those taxable equity funds and TLH in the process?

Note....this may change again when we start our pensions in a few years and find we no longer need to sell in our taxable funds to meet expenses. Thanks.
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Old 01-07-2016, 06:43 AM   #2
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You'll find a couple of different methods people are using here.
1. What you're doing. Live off the dividends, withdraw some extra $$ if that's not enough.
2. Continue to reinvest the dividends and just withdraw what you need.
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Old 01-07-2016, 10:08 AM   #3
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I do not reinvest dividends. This gives me flexibility. I can either use the proceeds for my expenses or use them to rebalance the portfolio. To me, it simplifies the balancing process.

Reinvesting the dividends doesn't really change anything, but exposes you to the volatility of the fund.
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Old 01-07-2016, 10:39 AM   #4
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I do not reinvest dividends. This gives me flexibility. I can either use the proceeds for my expenses or use them to rebalance the portfolio. To me, it simplifies the balancing process.
+1
This is what I do in my taxable accounts as well. Early in January I first withdraw cash from dividends for the coming year's expenses. Any dividend cash left over plus any cash from capital gains distributions gets used in rebalancing.

Quote:
If you fall short to meet expenses, do you then sell whatever else you need from those taxable equity funds and TLH in the process?
The only year so far when I didn't have enough for expenses, was last year, when I bought my dream house in cash and moved. Out of sheer luck the timing was such that I sold near the top of the market in May.
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Old 01-07-2016, 10:45 AM   #5
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I take after tax dividends in cash (tax deferred are reinvested) then combine with pension and consulting income and use to pay expenses, estimated taxes and AA rebalancing. Only time I really touch equities is if AA is really out of whack or need to tax loss harvest.
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Old 01-07-2016, 10:55 AM   #6
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I take divs from taxable account as received which along with pension covers our spending. Not surprising because spending is pre budgeted for the sum mentioned. At some point will need to liquidate some equities to prevent too large a legacy. Generally don't need to rebalance as portfolio is 100% equities.
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Old 01-07-2016, 03:16 PM   #7
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I have shut off dividend reinvesting in most taxable and IRA accounts, so that this cash will be available for spending, or just buying more investments if it's not needed.
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Old 01-07-2016, 03:41 PM   #8
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Originally Posted by walkinwood View Post
I do not reinvest dividends. This gives me flexibility. I can either use the proceeds for my expenses or use them to rebalance the portfolio. To me, it simplifies the balancing process.

Reinvesting the dividends doesn't really change anything, but exposes you to the volatility of the fund.
This is also what I do.
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Old 01-07-2016, 04:20 PM   #9
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I am not quite there yet but what you are doing is pretty much my plan, plus taking required IRA distributions.
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Old 01-08-2016, 07:40 AM   #10
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Generally don't need to rebalance as portfolio is 100% equities.
What no sector rebalancing? It seems to me that there are some deals in oil right now that could pay dividends in the future!
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Old 01-08-2016, 08:11 AM   #11
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.........................................

If my muni bond income and the dividends from the equity funds are not enough to meet expenses .....I plan to sell what I need from the equity funds in taxable. This way I could also tax loss harvest to prevent capital gains in these accounts. This will also help manipulate taxable income as we will apply for an ACA health care plan this year. ............................................
not sure if you meant to write it this way but wouldn't you want to TLH to lower taxes even if you had enough income to meet expenses & met the ACA requirements (assuming you still met ACA requirements after TLH)?
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