Question for Retiree's

[Bikerdude]

I was wondering how other retired people handle dividend and capital gain distributions from mutual funds. Do you spend your capital gains and dividends or reinvest? I have several core balanced funds that I am considering pulling living expenses from. I will probably need more than just dividends. Merely selling shares would mean I would have to sell equity holdings along with fixed. Something I would not want to do in a down market. Your thoughts?

[73ss454]

Only in our taxable account do we have dividends and such put into our MM for living expenses.

[Moemg]

Quote:

Originally Posted by 73ss454 Only in our taxable account do we have dividends and such put into our MM for living expenses.

I do the same . I reininvest my dividends and capital gains in retirement accounts.

[W2R]

I have the dividends and capital gains in my taxable account going to a Vanguard MM fund.

When I retire (towards the end of next year), I plan to live off of some of that. Some will get re-invested when I rebalance. Since I plan to re-balance during the last week of the December or the first week of January of each year, and since capital gains are often distributed in December, this will not be much of a delay.

If it turns out that I have too much $$ sitting around in MM and not doing anything for me, I can re-think this at that time.

In my tiny Roth, that I don't plan to touch for at least 20 years, everything is re-invested.

[MichaelB]

Taking distributions and gains in cash allows you to rebalance more easily.

[d]

i take some and leave some, depending on whether i wish to maintain or decrease a position

[grumpy]

With equities selling lately at bargain prices, I changed to reinvestment of both dividends and cap gains. When the markets were flying high I took them in cash and sought out relative bargains to reinvest the cash. Buy low, sell high.

Grumpy

[megacorp-firee]

I leave 401k alone. Income from taxable accounts are used for retirement expenses. Although I have been lucky enough not to have to use all of the income to date (yet). So I am stashing a little bit away right now.

[baldeagle]

I used to take both dividends and cap gains as cash to MM for living expenses. Now, however, I reinvest cap gains.

Reason? When gains were distributed, fund share price dropped and this messed up my allocation, particularly in Vanguard international funds.

[Rambler]

Not FIREd yet so did not vote. In the accumulation/getting the AA straightened up phase, I take the div and CG in cash and re-invest as I see fit so I can get the AA trued up to where I want it for FIRE. In retirement, my plan is to live off the dividends/muni interest, and re-invest the CG as I see fit for the stage of retirement I am in. My hope is to never have to use the capial or its gains to live on, and to pass the rest to the kids when we depart, but we certainly will not be telling them about that plan, lest they do not plan for themselves and/or we are not able to live up to that dream.

R

[rs0460a]

I also thought about this before retirement, when distributions and cap/gains were reinvested automatically.

While everybody has a different "mix" (different AA, taxable vs. non-tax, etc.) I'll just comment on what I actually did for this years income (I retired early '07).

First of all, I have another 9+ years to SS. My income comes from two primary sources, an SPIA (oh no ) and my IRA's (all tax advantaged, meaning that I pay the full tax on withdrawls).

This past December (being an "up year ), I "refunded" my "cash bucket" to my target, which is three years of gross income. Two years are kept within a MM IRA (which defers taxes) and one year in a taxable account (taxes are paid, in December). This keeps me from selling in a down market (as we are having now).

As another person stated, most/all distributions are done in December (with smaller "adjustments" in another part of the year). This allows me to fund my "cash bucket" and also re-adjust to my stated AA (currently 60/40, which the cash bucket falls within the 40%) once a year, all at the same time.

While I understand those who "cash in" their gains/distributions (especially in the case of taxable accounts, who can get a lower tax rate on these gains, which I cannot), I find that this "process" works, for me.

What you should do? Don't know - don't care. As long as it works for you, that's all that counts ...

- Ron

[cute fuzzy bunny]

Quote:

Originally Posted by Rambler Not FIREd yet so did not vote.

Yeah, I think some folks missed that qualifier.

Unless you couldnt spend the money or had other income sources, there wouldnt be a lot of reasons for a retiree to pay taxes on dividends and then reinvest them, only to withdraw money some other way.

[Bestwifeever]

Threads like these are so helpful to me in planning, to see what others do. Just saying. Thanks.

[mickeyd]

I could not answer as I needed 2 selections.

Taxable divs/cg go to my MMF. IRA/Roth divs are reinvested in the same fund that generated the $.

[Alan]

Quote:

Originally Posted by Want2retire Since I plan to re-balance during the last week of the December or the first week of January of each year, and since capital gains are often distributed in December, this will not be much of a delay.

Will you be sure to leave 30 days after getting your CG before re-investing some/all in the fund again? Does it count as a "wash" sale if you don't wait 30 days and then you have to pay some short term gain taxes? I'm a little fuzzy on the rules, I just remember a couple of years ago withdrawing some money triggering a long term CG tax as expected, but then the fund had a CG which was auto re-invested that same month and the tax form was more messy than usual and I paid some short term CG tax.

[W2R]

Quote:

Originally Posted by Alan Will you be sure to leave 30 days after getting your CG before re-investing some/all in the fund again? Does it count as a "wash" sale if you don't wait 30 days and then you have to pay some short term gain taxes? I'm a little fuzzy on the rules, I just remember a couple of years ago withdrawing some money triggering a long term CG tax as expected, but then the fund had a CG which was auto re-invested that same month and the tax form was more messy than usual and I paid some short term CG tax.

Hmm!! Interesting question. Some years I'd be likely to be putting it another fund, I'd think, when rebalancing. But if there is an opportunity to take advantage of "wash" sale rules, of course that would be advantageous.

[cute fuzzy bunny]

I used to take the dividends and CG's and spend what I needed to spend, and always ended up with a big surplus at the end of the year to go bargain hunting with.

Now I reinvest the CG's and spend the dividends. Less work.

I have done some funny business in my IRA's where I took dividends and gains from funds that spit off a lot of them, like a reit fund, and had it invested automatically into something fun like a small cap value fund. That way I was constantly DCAing into SCV while not letting the REIT funds portion of my allocation get out of hand.

[Alan]

Quote:

Originally Posted by Want2retire Hmm!! Interesting question. Some years I'd be likely to be putting it another fund, I'd think, when rebalancing. But if there is an opportunity to take advantage of "wash" sale rules, of course that would be advantageous.

I don't think it is a big deal, just be careful you don't buy funds for which you may have sold some shares at a loss within 30 days otherwise you can't write off the capital loss against other capital gains.

[Ed_The_Gypsy]

Quote:

Originally Posted by MichaelB Taking distributions and gains in cash allows you to rebalance more easily.

That is what I am doing.

All my retirement funds are in IRAs with Vanguard, so it doesn't matter tax-wise what I do.

By the way, I have started my exit strategy. I bought a 5-year CD with ~4% of my pot. Next year I may buy a 5-year TIP (if there is such a thing). In 5 years, I will have ~20% of everything in a 5-year ladder.

I am not retired yet, so I didn't vote.