Dividends and CG: Reinvest or Distribute?

[pb4uski]

Good point I had heard of but forgotten about.

[David1961]

The decision does not have to be an "all or nothing". Assuming you don't need all of the distributions to live off of, you could have the distributions of one fund go to a money market fund and reinvest the distributions of the other fund. The main thing is you have to maintain a positive cash flow. Of course, you could also take all distributions as cash and then reinvest some of them later, if you choose.

[audreyh1]

Good point, Animorph! I got bit once by forgetting that I had reinvesting turned on and then took a tax loss on a fund. Oooops! What was disallowed was tiny, but it always makes the Schedule D more complicated.

I have found that even if I don't need all the distributions for annual withdrawal, I usually then them for rebalancing - that is, they would be directed to a different fund, so more tax efficient to let them accumulate in cash.

[scrabbler1]

Quote:

Originally Posted by David1961 The decision does not have to be an "all or nothing". Assuming you don't need all of the distributions to live off of, you could have the distributions of one fund go to a money market fund and reinvest the distributions of the other fund. The main thing is you have to maintain a positive cash flow. Of course, you could also take all distributions as cash and then reinvest some of them later, if you choose.

Good point. Since I ERed in 2008, I have changed some of the distribution options on the smaller funds I own, sometimes reinvesting them, sometimes taking them as cash depending on what I need to cover my expenses. One of my funds in a stock fund which pays dividends every quarter, not every month. There, I can take the distribution in cash if I know I will need it in the next few months should I go on a spending spree like I did in Dec2013-Jan-Feb of this year and needed the April distribution to help cover my expenses.