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Dividend Reinvesting in Taxable Accounts in Retirement
08-05-2020, 04:14 PM
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#1
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Full time employment: Posting here.
Join Date: Oct 2015
Posts: 900
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Dividend Reinvesting in Taxable Accounts in Retirement
Double checking the logic... is there any reason NOT to turn off the dividend reinvesting button in your taxable accounts once retired? While dividend reinvesting in the accumulation phase always seemed like the right move, is there any real argument to continue on this way in retirement and then just take out your annual cash needs at the end of year re-balance? I always assumed since you were paying the taxes anyways, why not take those dividends as the first bucket of cash for your planned annual spend and then manage your additional cash needs based on strategic tax sensitive withdrawals from your tax differed and taxable accounts. Perhaps a dumb question with an obvious answer, but asking anyways.
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08-05-2020, 04:32 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,633
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I use my taxable dividends for expenses and have since I retired seven years ago. I do let my CDs compound, but can take that interest out if needed. Do whatever works for you.
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08-05-2020, 04:44 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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+1.... once I retired and was using some taxable funds for living expenses it seemed foolish to continue dividend reinvesment so I started just taking dividends in cash and it effectively reduced what I had to withdraw from other taxable accounts for expenses. If I received $10k a year of dividends it meant $10k less a year that I had to take out of online savings for living expenses.
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Retired Jan 2012 at age 56
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08-05-2020, 06:05 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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I have so much cash flow in my taxable from my bond ladder, I won’t touch the equities for 10+ years so I reinvest the dividends. With that timeframe, it should work in my favor.
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08-05-2020, 06:14 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,806
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Quote:
Originally Posted by DawgMan
Double checking the logic... is there any reason NOT to turn off the dividend reinvesting button in your taxable accounts once retired? ...
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I really don't care for automatic dividend re-investing even when you are not retired.
I'd rather let them pile up for a bit, then decide where I want to put them. That way, I can rebalance, I can avoid wash sales if I need to sell, etc.
-ERD50
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08-05-2020, 06:17 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,313
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When DW's RMDs kick in they will produce far more cash than we need. At that point I may turn dividend reinvesting back on. We will still have enough extra cash to strategically buy/rebalance as we see fit.
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Idleness is fatal only to the mediocre -- Albert Camus
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08-05-2020, 06:28 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,891
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Quote:
Originally Posted by Dash man
I use my taxable dividends for expenses and have since I retired seven years ago. I do let my CDs compound, but can take that interest out if needed. Do whatever works for you.
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Same here. I know I will need the money to spend, why re-invest and then sell? We usually need to sell a little more, so ultimately we need to sell something, but only for about 1/3 of our spending.
Do what ever works for you. I just find it simpler, and I am not worried about losing 30-90 bps for 90 days (just a guestimate).
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08-05-2020, 06:38 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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I spend my divi's and my bond interest first. Then I sell for more dough as needed.
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08-06-2020, 06:02 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,871
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Quote:
Originally Posted by ERD50
I really don't care for automatic dividend re-investing even when you are not retired.
I'd rather let them pile up for a bit, then decide where I want to put them. That way, I can rebalance, I can avoid wash sales if I need to sell, etc.
-ERD50
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+1
and
+1
I can't think of a good reason to automatically reinvest in taxable accounts.
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08-06-2020, 06:09 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,679
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I am not old enough to use my tIRA for withdrawals to pay my expenses. Only the monthly dividends from my main bond fund are needed to pay the bills. Before this year, however, I needed to supplement this monthly income with quarterly dividends from a stock fund. But, when I liquidated that stock fund last December to buy a similar stock index fund, my monthly expenses dropped a lot so the main bond fund's monthly income was more than enough (I qualified again for the valuable ACA premium subsidy).
I have two smaller bond funds whose monthly dividends I reinvest because I don't need the income to pay the bills.
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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!"
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08-06-2020, 06:19 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,184
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If you know for certain that you would just reinvest in the same fund anyway, you might as well do automatic dividend reinvestment to stay invested the full time.
But if you need the money for expenses, or might invest elsewhere to keep your AA in balance or for any other reason, you should turn it off.
It's also a good point that it's easier to avoid wash sales with dividend reinvestment turned off.
This really applies whether or not you are retired, but retirees are much more likely to need cash for expenses now that there's no regular paycheck.
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08-06-2020, 11:39 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2012
Posts: 6,096
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We currently do not need dividends to live on due to our cash position. The only taxable accounts for which we have turned dividend reinvestment off is those we are no longer interested in accumulating shares. We have been moving those dividends into Roth IRAs as part our our allowed Roth IRA contributions.
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FIREd date: June 26, 2018 - "This Happy Feeling, Going Round and Round!" (GQ)
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