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Transferring dividends in an IRA
Old 03-04-2011, 06:27 PM   #1
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Transferring dividends in an IRA

Does anyone here take their dividends and/or capitol gains in an IRA or 401K and have them paid into another fund in the same account such as a MM instead of reinvesting them? I seem to remember this being discussed but have not been able to find the thread.
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Old 03-04-2011, 10:53 PM   #2
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Folks sometimes talk about doing this in taxable accounts to avoid the
nuisance of tracking multitudes of quarterly reinvestments over the years.
In a retirement account , you wouldn't have to worry about that since generally everything would be taxed at ordinary income rates.

They sometimes also do that in taxable accounts so they can rebalance the
portfolio.
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Old 03-05-2011, 05:50 AM   #3
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I'm retired and have most of my funds in TIRA's (no current tax issues, as would be in taxable).

I target three years of gross income (taxes included) in a TIRA MM fund, which I withdraw from on a monthly basis to cover expenses. That three year level is to ride out any downward market flux without having to sell when down.

Distributions from all other funds feed that MM fund, as they are issued so in my case, the answer is "yes" to the OP's question.

In the past, I would re-invest distributions into the same fund and over time sell off good performers to feed the MM fund. That was just too much tracking and required decisions as to when the "best time" would be to sell and move money to the MM fund. In this case, no decisions are required (I have too much other stuff to do in retirement )...
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Old 03-05-2011, 07:15 AM   #4
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We don't do it now but may begin doing so when RMD time arrives.
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Old 03-05-2011, 10:28 AM   #5
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I am in the withdrawal phase, rather than the growth phase.

I have all dividends in all accounts paid in cash rather than investing. It helps when I re-balance to have cash available in the different accounts to re-balance and locate assets, and to take distributions to fund retirement.

-- Rita
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Old 03-05-2011, 10:52 AM   #6
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If your IRA is in a brokerage account, i.e Schwab, TDameritrade and you do not reinvest dividends, then they are automatically swept into a cash or MM account. You can usually direct them to sweep all incoming money (deposits, sells, interest) into a MM account.
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Old 03-05-2011, 05:24 PM   #7
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I've been tinkering with the idea of doing this so I will have another cash reserve built up when I start withdrawing from my pretax accounts around the age of 60. At the same time I'm worried about having too much cash in my total portfolio and losing growth potential. I will have to think about this some more. Maybe I should consider my non-retirement savings as a separate portfolio and not try to manage the whole pie as one. I'll work it out, I have the time to do it now.
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Old 03-07-2011, 10:44 PM   #8
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Quote:
Originally Posted by kaneohe View Post
Folks sometimes talk about doing this in taxable accounts to avoid the
nuisance of tracking multitudes of quarterly reinvestments over the years.
In a retirement account , you wouldn't have to worry about that since generally everything would be taxed at ordinary income rates.

They sometimes also do that in taxable accounts so they can rebalance the
portfolio.
+1

Additionally, in a taxable account you avoid sneaky wash sales if you don't reinvest dividends/capital gains. If you sell shares at a loss and have a purchase within 30days of that fund/stock you end up with a ...mess. Reinvestment of a dividend counts as a purchase.

In a taxable account, I figure I already owe taxes on distributions, I may as well have it in cash were I can decide if I want to keep it there or invest in another fund to help re-balancing.

But in a sheltered account I don't have any tax consequences from cashing out one fund to buy another fund if I want to rebalance and there are no "wash sale" worries - I don't see any advantage to paying in cash for a sheltered account.
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Old 03-07-2011, 11:07 PM   #9
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Quote:
Originally Posted by Aeowyn View Post
+1

Additionally, in a taxable account you avoid sneaky wash sales if you don't reinvest dividends/capital gains. If you sell shares at a loss and have a purchase within 30days of that fund/stock you end up with a ...mess. Reinvestment of a dividend counts as a purchase.

In a taxable account, I figure I already owe taxes on distributions, I may as well have it in cash were I can decide if I want to keep it there or invest in another fund to help re-balancing.

But in a sheltered account I don't have any tax consequences from cashing out one fund to buy another fund if I want to rebalance and there are no "wash sale" worries - I don't see any advantage to paying in cash for a sheltered account.
Be careful if you transact the same security inside and outside an IRA.

Can IRA Transactions Trigger The Wash-Sale Rule?

Does the Wash-Sale Rule Apply to IRA transactions?

In 2008, the IRS issued Revenue Ruling 2008-5, in which it addressed the question of whether the wash-sale rules apply to IRAs. In this ruling, the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale, and the basis in the individual's IRA is not increased.
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Old 03-07-2011, 11:30 PM   #10
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Originally Posted by CyclingInvestor View Post
Be careful if you transact the same security inside and outside an IRA.

Can IRA Transactions Trigger The Wash-Sale Rule?

Does the Wash-Sale Rule Apply to IRA transactions?

In 2008, the IRS issued Revenue Ruling 2008-5, in which it addressed the question of whether the wash-sale rules apply to IRAs. In this ruling, the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale, and the basis in the individual's IRA is not increased.

I wish you hadn't told me that... La, la, la, la, la - I can't hear you...
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