Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 05-10-2021, 12:27 PM   #41
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,355
Quote:
So my question really should be - how do we manage to stretch SS & the small pension so that our portfolio grows for the next 50+ years before our son starts to spend it down?
50 years is a very, very long time. I wouldn't fret about it too much this early. As the Wizard said, focus now on the savings. Later you can play with optimizing the various buckets. Many things will change between now and then. Who is to say at the time he inherits he won't be FI himself and not need the inheritance. Maybe he will be thinking how do I maximize this for my grandchildren? One can only hope.
CRLLS 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 05-10-2021, 12:38 PM   #42
Thinks s/he gets paid by the post
 
Join Date: Feb 2021
Posts: 1,531
Quote:
Originally Posted by Safire View Post
So how is it "mental accounting" to presume that eating dividends isn't the same as selling shares? What am I missing here?
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
disneysteve is offline   Reply With Quote
Old 05-10-2021, 12:57 PM   #43
Full time employment: Posting here.
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 858
Quote:
Originally Posted by disneysteve View Post
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
You explained it fine.

I suppose another way is to think of dividends being immediately reinvested. I own 1200 shares of an index fund, the end of a quarter comes and BLAMMO, I now have 1205 shares of that fund.

Safire needs to focus on Total Return of index funds. There's not much "math" involved, actually...
TheWizard is offline   Reply With Quote
Old 05-10-2021, 02:28 PM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,976
Quote:
Originally Posted by disneysteve View Post
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
Yes, that explains it nicely. I tried to explain that within, say a Vanguard or Fidelity Mutual Fund (which, apparently OP owns within IRAs or 401(k)s etc.) there isn't really any opportunity to ONLY take out the dividends. Dividends, capital gains, etc. end up in a pot full of values of other stocks. SO picking out the actual dividends isn't really possible. If one wants to slavishly "LIVE" on dividends, one has to hold individual stocks and laboriously place the dividends into some sort of OTHER receptacle to make that happen. Doing so, takes away the advantages of owning mutual funds (mixed batches of several stocks that give diversification.) Otherwise, diversification becomes owning dozens of DIFFERENT individual stocks - each with its own dividend that must be slavishly harvested. What a royal pain!

I'm just trying to convince OP to FORGET about dividends. Let the money all go into the mutual fund pot and then take out what you need to live on. It doesn't matter where the value within the mutual fund came from. I understand the theory of "living only on dividends" - folks used to do that with indivdiul phone company or utility stocks and such. Now, we have mutual funds that commingle everything - dividends are like Prego - they're "in there" but you only notice them as an increase (hopefully) of your total mutual fund value every 3 months or whatever. Forget dividends!! Concentrate on earning what you need to meet your financial goals. Sorry, hope I'm not sounding like an ogre (any more than usual). And, as always remember that YMMV and my advice is officially worth what you pay for it.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 05-10-2021, 02:37 PM   #45
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: 32,313
Quote:
Originally Posted by disneysteve View Post
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
Yes, thatís right on the money! (Yuck, yuck)
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 05-10-2021, 02:48 PM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,976
[QUOTE=Safire;2604828]
Quote:
Originally Posted by racy View Post

Can you suggest a good site or resource that helps us understand and then assess LTC plans (aside from Google)? My husband's employer offers an external plan but I have no idea how to evaluate it and cannot find any reviews about it online.

Thanks!

No help here on sources of info - this site often addresses the topic, and as you might guess, the opinions are all over the place.

DW and I DO have LTC policies. Even so, I'd say I have no idea if that was a good idea or not. Ask me in 10 years.

The same rule that applies to ANY kind of insurance applies to LTC insurance. Insure against ONLY those losses you can't make up on your own. For instance, most folks MUST have liability insurance (first, it's the law in most states) but also because there is no technical limit on what you might be on the hook for in an accident. BUT you actually may NOT need collision insurance. What if you wreck your car and it's totaled. Can't you go out and buy a new car? If it has $5000 damage. Couldn't you just write a check for $5000 to a body shop? If the answers are "yes", then technically you don't need collision coverage. Of course, if you finance a car, the title owner will insist on collision coverage.

What about LTC insurance? There is a school of thought that says "poor" people don't need it because they will quickly go on Medicade. Rich people (whatever that means) don't need it because they have enough to write $10,000 checks every month. Folks in between MAY need it to protect either their spouse from bankruptcy or to protect their estate from depletion. Because OP has someone they wish to protect after they are gone, I'd suggest (only suggest) they may want to consider LTC to protect their assets.

How to find the right policy with right features, etc., isn't so easy to answer. There are lots of problems with LTC (like the increasing premiums that WE have experienced.) The LTC policy writers didn't realize that folks would own these for a few years and then NOT drop them. Folks hung onto them and suddenly, the companies had to start paying out! So, they went back to the insurance regulators and begged to increase the premiums - which the regulators granted. Will that happen in the future? Hard to say. I hope not. Local LTC facilities charge $10,000/month. So it becomes a real problem very quickly if one or both need that service for a long time. I don't have an answer so YMMV.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 05-10-2021, 02:51 PM   #47
Recycles dryer sheets
 
Join Date: Mar 2021
Posts: 155
Quote:
Originally Posted by disneysteve View Post
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
That is only if I spend only the number of shares that my dividend reinvestment could have gotten me. If I spend more shares than what my dividends would have purchased I would soon be spending down the principle. Spending only the dividend forces me to conserve the principle. Am I getting this right?


Quote:
Originally Posted by Koolau View Post
Yes, that explains it nicely. I tried to explain that within, say a Vanguard or Fidelity Mutual Fund (which, apparently OP owns within IRAs or 401(k)s etc.) there isn't really any opportunity to ONLY take out the dividends. Dividends, capital gains, etc. end up in a pot full of values of other stocks. SO picking out the actual dividends isn't really possible. If one wants to slavishly "LIVE" on dividends, one has to hold individual stocks and laboriously place the dividends into some sort of OTHER receptacle to make that happen. Doing so, takes away the advantages of owning mutual funds (mixed batches of several stocks that give diversification.) Otherwise, diversification becomes owning dozens of DIFFERENT individual stocks - each with its own dividend that must be slavishly harvested. What a royal pain!

I'm just trying to convince OP to FORGET about dividends. Let the money all go into the mutual fund pot and then take out what you need to live on. It doesn't matter where the value within the mutual fund came from. I understand the theory of "living only on dividends" - folks used to do that with indivdiul phone company or utility stocks and such. Now, we have mutual funds that commingle everything - dividends are like Prego - they're "in there" but you only notice them as an increase (hopefully) of your total mutual fund value every 3 months or whatever. Forget dividends!! Concentrate on earning what you need to meet your financial goals. Sorry, hope I'm not sounding like an ogre (any more than usual). And, as always remember that YMMV and my advice is officially worth what you pay for it.
At retirement, what if I turned off dividend reinvestment option in my a/cs? That would show me what dividend my portfolio has earned and help me withdraw only that cash?

Right now, I don't check what my funds are earning in dividends. That will only change when we no longer have a paycheck each month.
Safire is offline   Reply With Quote
Old 05-10-2021, 03:05 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,976
Quote:
Originally Posted by Safire View Post
That is only if I spend only the number of shares that my dividend reinvestment could have gotten me. If I spend more shares than what my dividends would have purchased I would soon be spending down the principle. Spending only the dividend forces me to conserve the principle. Am I getting this right?




At retirement, what if I turned off dividend reinvestment option in my a/cs? That would show me what dividend my portfolio has earned and help me withdraw only that cash?

Right now, I don't check what my funds are earning in dividends. That will only change when we no longer have a paycheck each month.
I guess I'm gonna give up on trying to convince you to quit worrying (or even thinking) about dividends. I would strongly suggest (not advise but suggest) you pay a fee-only financial planner (a Certified Financial Planner) to guide you through this and other discussions. You might pay $150/hour or more, so it ain't cheap. But 2 or 3 hours of sharing what you want to accomplish and then receiving specific feed back on how you might accomplish it might give you comfort and direction.

I strongly suggest you ONLY talk to a planner who DOES NOT sell anything but their time. If they sell ANYTHING financial then they have a vested interest in what you do. They will NOT be your fiduciary though they may swear that they are. It is my gentle, humble opinion that you need a better understanding of dividends and perhaps other issues - which a GOOD fee-only CFP might be able to help you with. Good luck. I'm not a good advisor - even though I have no stake in this. Always keep in mind that YMMV.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 05-10-2021, 03:09 PM   #49
gone traveling
 
Join Date: Aug 2020
Posts: 682
@Safire, you are getting alot of "help" on this thread.

Forget about dividends, capital gains, special distributions and the like. Focus on yield.

To achieve a safe withdrawal rate, your portfolio needs to yield more than your living expenses. Yield and living expenses in this sentence are after tax. When this happens, you have a portfolio whose balance will be preserved under the preponderance of foreseeable scenarios.

I suggest you spend 1 hour with a financial planner to fill in some gaps in your understanding. Reading the quantity of comments from the people on this site, who range in age from 25 to 95, will cause you to chase your tail.
chassis is offline   Reply With Quote
Old 05-10-2021, 03:21 PM   #50
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,718
Quote:
Originally Posted by Safire View Post
Thank you for sharing that link. ...

We (husband & I) do not hold single stocks. We hold only VTSAX (total stock), VTIAX (Vanguard Total International stock) and some VWILX (International Growth). ...

Is this accurate thinking? ...
Sorry for the delay responding. You're doing fine.

The main issue with drawing out dividends is, as Dr. French explained in the video, that one might be tempted to chase dividends and hence end up with a distorted aka undiversified portfolio. Even funds with "dividend" in the title represent distortion. But you're not buying those funds anyway. Same-o for someone drawing only the interest from a bond portfolio. A strong focus on adhering to this rule and wanting more money could lead to buying high interest/high risk bonds. "High yield" in the fund name is the giveaway. (The fund titles never say "high risk." )

If you're just using the dividends from diversified equity funds as a budgeting device and you understand the risks of chasing dividends, there's no problem. It's not far from putting all your loose change in a jar to be used for some special treat when the jar is full. It's unlikely this would cause you to seek out loose change as a goal.

As has become obvious in your thread here, this topic has a tendency to get people quite steamed up. Once you understand dividends, you can just ignore any lectures you may get.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 05-10-2021, 03:36 PM   #51
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,796
In 1994 the SPY ETF paid a 2.66% dividend. If you invested a $1,000,000 and only spent the dividends you would have had $26,600 to spend in the first year, about $48,000 adjusted to today for inflation.

Without ever selling a share of the SPY ETF today you would have $8,150,530 at 12/31/2020. An inflation adjusted Portfolio would have been $1,787,300. Your dividend income would be $199,240 in 2020 a growth rate of eight percent per annum.

In 2009 you would have had your income cut (17%) as well as in 2001(5%), but on average dividends went up 8 percent per year while inflation was 2.17% per year, so the actual amount to spend was an overwhelming abundance to where you an 11% withdrawal rate on an inflation adjusted portfolio.

The obvious advantage of dividend only spending is the relative safety of the dividend level and the amount to cut back versus the drawdowns that occurred in 2001 and 2008, now the FED has made restoring the stock market one of it's primary goals, so living on spending of the portfolio has never hurt much and a market that is up.

But in general if anyone has not done well in the past 25 years there really is no excuse, the market has been extremely generous for a very long time.
__________________
But then what do I really know?

https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
Running_Man is offline   Reply With Quote
Old 05-10-2021, 03:37 PM   #52
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,796
Year Dividends Rate Cumulative Dividends ETF VALUE Div Reinvest
1994 26.60 2.66% 26.60 977.42 1,004.02
1995 28.41 2.83% 55.01 1,321.62 1,386.00
1996 30.77 2.22% 85.78 1,589.50 1,697.70
1997 31.92 1.88% 117.70 2,091.74 2,266.05
1998 33.31 1.47% 151.01 2,661.06 2,916.12
1999 34.41 1.18% 185.42 3,172.20 3,510.66
2000 36.16 1.03% 221.58 2,830.87 3,169.07
2001 34.54 1.09% 256.12 2,467.32 2,796.64
2002 36.92 1.32% 293.04 1,902.11 2,192.90
2003 40.79 1.86% 333.83 2,402.67 2,810.77
2004 55.93 1.99% 389.76 2,612.03 3,111.62
2005 55.70 1.79% 445.46 2,691.35 3,261.81
2006 64.58 1.98% 510.04 3,064.56 3,778.72
2007 72.55 1.92% 582.59 3,163.11 3,972.78
2008 74.69 1.88% 657.28 1,939.39 2,510.51
2009 61.26 2.44% 718.54 2,403.38 3,172.40
2010 65.03 2.05% 783.57 2,715.99 3,650.07
2011 75.19 2.06% 858.76 2,711.32 3,718.98
2012 92.60 2.49% 951.37 3,077.38 4,313.69
2013 102.23 2.37% 1,053.60 3,998.65 5,707.30
2014 119.28 2.09% 1,172.88 4,453.39 6,475.64
2015 133.4 2.06% 1,306.28 4,417.41 6,556.73
2016 146.87 2.24% 1,453.15 4,848.61 7,343.62
2017 158.62 2.16% 1,611.78 5,796.04 8,937.20
2018 171.59 1.92% 1,783.37 5,420.64 8,529.95
2019 192.78 2.26% 1,976.15 6,990.56 11,193.16
2020 199.24 1.78% 2,175.38 8,150.53 13,249.72
__________________
But then what do I really know?

https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
Running_Man is offline   Reply With Quote
Old 05-10-2021, 03:50 PM   #53
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,976
Quote:
Originally Posted by OldShooter View Post

As has become obvious in your thread here, this topic has a tendency to get people quite steamed up. Once you understand dividends, you can just ignore any lectures you may get.
Heh, heh, no steam here. Folks are free to do what they want. I simply look upon this site as a place where those of us who have "arrived" can share what helped us get here. I know ego CAN become involved. I've been guilty of that in other discussions, but not here (at least, that's my story and I'm sticking to it.)

If it seems like folks are ganging up on Safire, that's unfortunate because I honestly think we're trying to help - not exert our "authority" or profound superiority. I often relay how I've made every mistake in the books (can you spell abusive tax shelters?) EXCEPT I have been a good saver - my only claim to fame. I always say YMMV because, well, YMMV - steam optional!
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 05-10-2021, 04:08 PM   #54
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,718
Quote:
Originally Posted by Koolau View Post
... I simply look upon this site as a place where those of us who have "arrived" can share what helped us get here. ...
No problem. & not picking on anyone in particular.

And the truth is that we do get "interesting" discussions here with people who deeply believe that dividends are free money and that stock sales are "principal." It's tempting to bash those beliefs (in the individual's best interests) because they are so wrong and lead to self-defeating behavior.

My point was only to note that the OP was just spending the dividends that they get from broadly diversified funds, so the risk of chasing dividends with bad portfolio consequences is not there. So, her understanding of future possible risks is important but no need to bash her for sins not actually being committed.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 05-11-2021, 03:15 AM   #55
Thinks s/he gets paid by the post
ER Eddie's Avatar
 
Join Date: Mar 2013
Posts: 1,687
Quote:
Originally Posted by disneysteve View Post
Look at two options:


1) You have $1,000 worth of shares. They pay a $10 dividend that you take out. You still have $1,000 worth of shares and $10 in your pocket.


2) You have $1,000 worth of shares. They pay a $10 dividend that you reinvest, so you now have $1,010 worth of shares. You sell $10 worth of shares. You're back to $1,000 worth of shares and $10 in your pocket.


It doesn't matter if you take the $10 from the dividend payment or from the sale of shares. The end result is the same.


Does that make sense? Maybe someone else can explain it differently.
Makes sense.

The only difference I can see is that in the first instance, you're refraining from buying shares, and in the second instance, you're selling shares. That would have slightly different tax consequences -- dividend taxes on the first transaction and capital gains on the second. Iirc, those rates are pretty close, so I'm not sure the difference matters all that much, but I thought I'd point it out as a possible distinction. I believe the rates have differed significantly in the past, and they might again in the future, who knows.
ER Eddie is offline   Reply With Quote
Old 05-11-2021, 03:23 AM   #56
Thinks s/he gets paid by the post
ER Eddie's Avatar
 
Join Date: Mar 2013
Posts: 1,687
Quote:
Originally Posted by Safire View Post
At retirement, what if I turned off dividend reinvestment option in my a/cs? That would show me what dividend my portfolio has earned and help me withdraw only that cash?

Right now, I don't check what my funds are earning in dividends. That will only change when we no longer have a paycheck each month.
That's what I do. It's actually quite simple, you just turn off the re-investment option on those funds (you can choose some funds or all, so you can tweak it to the level of income you need). That money then goes into a money-market type account, which I feed into my checking account as needed.

I'd suggest checking what your dividends are spitting out. You can get that information easily from your end-of-year statements. That'll give you a ballpark estimate for how much income you can expect. At least in today's dollars.

Oh, one stat I'll throw your way -- during an average bear market or recession, dividends drop only by about 4%. There are outlier cases where they've dropped more (like 2008-09), but the average drop is only 4%. I can provide a link if you like. That's one of the things I like about relying on dividends, actually. You don't get the stomach-churning drop that you do with equity values during a recession. Yes, money is "fungible," but psychologically, the effect is different, at least for me. I dislike having to sell stock during a downturn, and taking dividends allows me to avoid that (the counter would be that I also lose out on purchasing shares during a downturn).
ER Eddie is offline   Reply With Quote
Old 05-11-2021, 03:56 AM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 12,381
Quote:
Originally Posted by ER Eddie View Post
Makes sense.

The only difference I can see is that in the first instance, you're refraining from buying shares, and in the second instance, you're selling shares. That would have slightly different tax consequences -- dividend taxes on the first transaction and capital gains on the second. Iirc, those rates are pretty close, so I'm not sure the difference matters all that much, but I thought I'd point it out as a possible distinction. I believe the rates have differed significantly in the past, and they might again in the future, who knows.
You are taxed on dividends whether you reinvest or not.

If you reinvest and then sell, you also have a sale which is a separate taxable event. If you sell the shares you just reinvested, the gain or loss should be very small. But if you're using avg cost basis, there could be a larger gain (or loss).

btw, long term capital gains are taxed exactly like qualified dividends. Not "pretty close", but the same. At least on federal taxes. Likewise, short term capital gains are taxed like unqualified dividends.
RunningBum is offline   Reply With Quote
Old 05-11-2021, 05:23 AM   #58
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 2,636
Quote:
Originally Posted by SevenUp View Post
Yes, but only on the difference between your expenses and (the pension plus social security) - if the pension has a COLA feature.

Taking a dividend payout for living expenses is no different than selling some shares for living expenses.

Please explain. It seems to me if you sell shares then any dividend payout will decrease because fewer shares would result in fewer dividends. But if instead you just take dividends each year then you have the same number of shares for next years dividend payout.

Yes, it can be more complex but then we start playing "What if?" and guessing/predicting since it can go in either direction.



Cheers!
Badger is offline   Reply With Quote
Old 05-11-2021, 06:11 AM   #59
Thinks s/he gets paid by the post
 
Join Date: Oct 2019
Posts: 2,676
Slightly off topic, but taxes will affect the actual spending you get from your 4%. I suggest having all 3 types of savings, tIRA, Roth IRA and a taxable account. Because we don't know how tax laws will change and where dollar limits will be placed, you need money in all 3 types, so you have flexibility, to adjust with tax law changes.

I almost wish I had kept everything in taxable accounts as I can live under the $80k 0% tax bracket. But, that 'loophole' could change in the future.
My first retired tax year, I paid $0 tax, all LTCGs under $80k, the second year I did $75k in Roth conversions and withdrew enough taxable LTCGs for taxes and spending.
I have some taxable accounts that are 50% LTCGs, so if I withdraw $70k, only $35k is taxable, but I have $70k to spend.
Time2 is offline   Reply With Quote
Old 05-11-2021, 06:20 AM   #60
Thinks s/he gets paid by the post
ER Eddie's Avatar
 
Join Date: Mar 2013
Posts: 1,687
Quote:
Originally Posted by RunningBum View Post
You are taxed on dividends whether you reinvest or not.

If you reinvest and then sell, you also have a sale which is a separate taxable event. If you sell the shares you just reinvested, the gain or loss should be very small. But if you're using avg cost basis, there could be a larger gain (or loss).

btw, long term capital gains are taxed exactly like qualified dividends. Not "pretty close", but the same. At least on federal taxes. Likewise, short term capital gains are taxed like unqualified dividends.
Thanks for the clarification. So, if you use the dividends rather than reinvest them, you get taxed once (which happens regardless), but if you reinvest the dividend and then sell it, you get taxed both on the dividend and the cap gains.

Have dividend tax rates always been the same as cap gains rates? Or have they differed in the past?
ER Eddie 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
The 4% Rule is now the 5% Rule RenoJay FIRE and Money 96 10-28-2020 04:48 PM
80% rule? 4% Rule? What is it really? Talkjk Hi, I am... 20 09-29-2018 09:03 AM

» Quick Links

 
All times are GMT -6. The time now is 01:32 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.