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Dividend Reinvesting in Taxable Accounts in Retirement
Old 08-05-2020, 04:14 PM   #1
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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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Old 08-05-2020, 04:32 PM   #2
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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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Old 08-05-2020, 04:44 PM   #3
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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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Old 08-05-2020, 06:05 PM   #4
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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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Old 08-05-2020, 06:14 PM   #5
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Originally Posted by DawgMan View Post
Double checking the logic... is there any reason NOT to turn off the dividend reinvesting button in your taxable accounts once retired? ...
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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Old 08-05-2020, 06:17 PM   #6
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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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Old 08-05-2020, 06:28 PM   #7
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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.
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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Old 08-05-2020, 06:38 PM   #8
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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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Old 08-06-2020, 06:02 AM   #9
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Originally Posted by ERD50 View Post
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
+1

and

+1

I can't think of a good reason to automatically reinvest in taxable accounts.
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Old 08-06-2020, 06:09 AM   #10
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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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Old 08-06-2020, 06:19 AM   #11
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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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Old 08-06-2020, 11:39 AM   #12
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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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