This is admittedly more a rant than a query. To get the discussion going, let's trot out my strawman friend, Smith.
Smith is in late middle-age, single, no kids. He spent his adult lifetime saving aggressively and investing. Tax-advantaged or tax-deferred savings vehicles were limited, so Smith put most of his money - call it 70% - into straight-up taxable brokerage accounts. Into a Boglehead-style 3-fund portfolio of index funds. He doesn't trade or rebalance. But every year, the dividends come, and they're all taxable. He automatically reinvests the dividends and pays the income tax out-of-pocket.
Eventually Smith realizes that he's paying more in taxes on his dividends than for... anything else. His income, while he's still working, goes mostly towards covering said taxes. While working, he can't really save any more money, no matter how frugally he lives, because everything goes to feeding to tax monster. It's either that, or make withdrawals from the portfolio, to pay taxes... which seems silly, since the whole point is to keep accumulating, right?
Smith wants to retire, but he realizes that he's crashed out of the ACA subsidy range by several multiples. Shucks, he can't even qualify for an EV credit because what the dividend distributions do to his AGI. If only he'd put everything 30 years ago into Berkshire Hathaway, which famously pays no dividends! Too late now.
Smith feels stuck. How can he un-stick himself?
Smith is in late middle-age, single, no kids. He spent his adult lifetime saving aggressively and investing. Tax-advantaged or tax-deferred savings vehicles were limited, so Smith put most of his money - call it 70% - into straight-up taxable brokerage accounts. Into a Boglehead-style 3-fund portfolio of index funds. He doesn't trade or rebalance. But every year, the dividends come, and they're all taxable. He automatically reinvests the dividends and pays the income tax out-of-pocket.
Eventually Smith realizes that he's paying more in taxes on his dividends than for... anything else. His income, while he's still working, goes mostly towards covering said taxes. While working, he can't really save any more money, no matter how frugally he lives, because everything goes to feeding to tax monster. It's either that, or make withdrawals from the portfolio, to pay taxes... which seems silly, since the whole point is to keep accumulating, right?
Smith wants to retire, but he realizes that he's crashed out of the ACA subsidy range by several multiples. Shucks, he can't even qualify for an EV credit because what the dividend distributions do to his AGI. If only he'd put everything 30 years ago into Berkshire Hathaway, which famously pays no dividends! Too late now.
Smith feels stuck. How can he un-stick himself?