Reinvest Dividends and Capital Gains?

[mountainsoft]

When would you choose NOT to reinvest dividends and capital gains?

Does it matter if it's a taxable brokerage account or a Roth retirement account?

Does it matter if you are pre-retirement or post-retirement?

 

[athena53]

I'm retired. For me, it's a way to free up cash in my after-tax accounts so I can make periodic withdrawals. That way I don't have to liquidate other holdings.

 

[steelyman]

I am (very slowly) moving funds from a taxable brokerage account to a Roth brokerage account by accumulating the dividends and using them for contributions.

 

[CardsFan]

I am retired also.

During accumulation I had everything re-invested.

Now:

Roth: All stocks. Re-invest everything. We anticipate this will go to DS when we are both gone. No plans to ever tap it.

After-tax: no re-investment. Use for spending and/or rebalancing.

tIRA: Right now No re-investing. Use for re-balancing. Could change this in the future

 

[marko]

Outside of SS, dividends and MF cap gains are our only income.

We re-invested before RE and now they all go into a holding account where we transfer when the checking gets low.

 

[PaunchyPirate]

I think the reasons to NOT automatically re-invest in the same investment that is generating the income are:

1. I want or need the money to spend on other things.
2. I want to decide what the "best investment" to re-invest in after getting the income.
2a. "best investment" may mean one that I want to own more of because it's good.
2b. "best investment" may mean one that I need to add more to in order to maintain
my desired asset allocation.
2c. "best investment" this month might be the same investment that just paid out.
2d. in other words... flexibility in meeting various goals with the income.

If none of these apply, one might as well set to auto reinvest all income until one of them applies. Both before and after retirement.

I'm retired. I currently have my tIRA set to fully auto-reinvest. My taxable account is set to not reinvest anything. I don't currently need the income to spend, so I re-invest it periodically into whatever needs an infusion to better maintain my asset allocation. When I need some income, my first source will be to redirect my dividends to my bank account.

 

[Out-to-Lunch]

Yes, it definitely matters whether this is in a taxable account or a tax-preferred (either Roth or tIRA) account. In a tax-preferred, if you later decide to move those funds somewhere else, there are no tax consequences. In taxable, you have to worry about capital gains and keeping track of multiple small lots (if you track specific ID).

 

[scrabbler1]

Prior to ERing, I reinvested everything because my wage income was always enough to pay my expenses. This included my taxable account and retirement accounts (401k).

After I ERed, 13 years ago at age 45, my taxable account's investment income has been my only source of income, so I need to take much of it as cash. In my main bond fund, I always take the dividends as cash, as it acts as a monthly "paycheck." The rest of my taxable account's investment income, from the remaining dividends to all cap gain distributions, it has varied between cash and reinvest. It depends on how much cash I need as a supplement to pay my bills. And sometimes, for any large cap gain distributions, I have to make sure I have enough cash laying around to pay the added taxes on them. If I do, then I take the CGD as cash, set aside some to pay the taxes (and anything else I might need it for), then reinvest the rest.

 

[Montecfo]

I generally do not automatically reinvest dividends except in bond funds in my IRAs.

PaunchyPirate set forth some of the reasons in post #5 above.

I generally prefer to make each investment decision based on conditions at the time.

 

[mrfeh]

This was just discussed:

https://www.early-retirement.org/fo...nt-and-reinvestment-vs-distribute-112668.html

 

[audreyh1]

When would you choose NOT to reinvest dividends and capital gains?

Does it matter if it's a taxable brokerage account or a Roth retirement account?

Does it matter if you are pre-retirement or post-retirement?

Since retiring I don’t automatically reinvest in my taxable accounts, as taxes must be paid from cash flow, plus I take annual withdrawals and rebalance - it’s fewer transactions if you just leave distributions in cash.

In my tax-deferred accounts I sometimes reinvest. I don’t have to worry about tax consequences when rebalancing or selling in those accounts.

 

[Badger]

I don't reinvest dividends in my IRA. The money is put in a MM account to use for RMD each year so I don't affect the MF shares in the IRA. Just makes it easier for me to keep track and compare with previous years. Certainly not ideal as a way to make more money but it doesn't affect my NW when there is enough to see us through and leave an inheritance and donations.


Cheers!

 

[VanWinkle]

I reinvest in my Roth and Tira, take from taxable as income. Retired 6 years in May and it has worked so far.

VW

 

[OldShooter]

Yes, it definitely matters whether this is in a taxable account or a tax-preferred (either Roth or tIRA) account. In a tax-preferred, if you later decide to move those funds somewhere else, there are no tax consequences. In taxable, you have to worry about capital gains and keeping track of multiple small lots (if you track specific ID).

This. And if you're not using average cost as a basis, each of those little lots requires a separate sell order.