When in dist. mode- reinvest div & int & sell shares or take div & int in cash?

[cashflo2u2]

Are there any definitive studies one vs. the other for someone in distribution mode? I hear both recommended - I have been reinvesting but may switch to "clipping coupons" for the duration. I'd be interested in the valued opinions here.

[ziggy29]

Taxable account or an IRA?

[FinanceDude]

Quote:

Originally Posted by ziggy29 Taxable account or an IRA?

Same thing I wonder.........

[W2R]

I am not retired yet, but was planning to take what I need from dividends rather than reinvesting them.

Then, at the end of each year (or perhaps at the beginning of the next year), I planned to rebalance.

This would be with my taxable accounts (as my dividends are automatically reinvested with my TSP account). I would be interested in hearing about any problems with this plan.

[clifp]

I take the dividends and spend them in my taxable account, the beauty of dividends is they are far less volatile than the market. In my IRAs I do a little of both spend some reinvest others.

[Moemg]

I also take the dividends in my taxable account and reinvest the dividends in my IRA .

[dex]

My thought is that this is a cash flow issue and assets should be expended in the following order:

Estimated expense budget reduced by the following income until income equals expenses:
earned income
social security
pension etc
Income from cash equilievnet investments - holding for future years
expense budget
Income from taxable investments
selling of taxable investments
Income from tax sheltered investments
selling of tax sheltered investment

The income and selling of tax sheltered should be done according to tax requirements and to reduce taxes; if possible.

Did I miss anything?

[ejman]

In taxable account I take all distributions (Dividends and Capital Gains) into cash. (I'm already paying taxes on these distributions). In IRA I reinvest all distributions.

During the distribution phase for a taxable account I think it makes very little sense to reinvest distributions, pay taxes on these and then again on the capital gains for the shares you sell. Of course, this argument assumes there is a gain on the shares sold.

[cashflo2u2]

The bulk of my funds are in qualified accounts (IRAs) but some after tax monies. I will have to be using funds from the IRA in the not to distant future and I am curious if the answer is the same for funds in the qualified accounts.

[ESRBob]

I tend to keep qualified dividend-earning investments in my taxable accounts as they bear a lower tax rate than interest and non-qual dividends. I load up my IRAs with big interest earners. Then as others above have said here, I reinvest the IRA distributions and flow the taxable distributions into my MM account.

[DblDoc]

Quote:

Originally Posted by dex My thought is that this is a cash flow issue and assets should be expended in the following order: Estimated expense budget reduced by the following income until income equals expenses: earned income social security pension etc Income from cash equilievnet investments - holding for future years expense budget Income from taxable investments selling of taxable investments Income from tax sheltered investments selling of tax sheltered investment The income and selling of tax sheltered should be done according to tax requirements and to reduce taxes; if possible. Did I miss anything?

RMD's?

DD

[WilliamG]

We currently take more (a little) each year from IRA than it can produce in dividends and interest. I see no advantage to re-investing these and putting them at capital depreciation risk. I would rather make a conscious decision on where any re-balancing money is placed. We sweep dividends/interst to an IRA money market and since most of these come quarterly we withdraw from that money market to our taxable one at the end of each quarter. This keeps the MM in IRA relatively small.

[jimnjana]

Quote:

Originally Posted by cashflo2u2 The bulk of my funds are in qualified accounts (IRAs) but some after tax monies. I will have to be using funds from the IRA in the not to distant future and I am curious if the answer is the same for funds in the qualified accounts.

When its my time to start withdrawing from IRA I'll be sure to have at least a couple of years worth of withdrawls in cash, I'll also begin to stop reinvesting divies to maintain a cash cushion in the IRA.

Jim