Vanguard Wellington CG distribution ..... ouch.

[audreyh1]

I think you're talking about DIVIDENDS, not CGDs...

I am also talking about capital gains distributions from an index fund. They tend to be very small. Combined with dividend distributions they are still small.

 

[TheWizard]

Also, one should generally avoid holding any sort of balanced fund or target date fund in taxable, for two reasons:
1) the dividends from the bond portion are taxed as Ordinary Income.
2) they are less efficient to use for Tax Loss Harvesting from time to time...

 

[Koolau]

Just checked and so far this year it looks like Wellington Admiral will have a 7.5% CG distribution in December. This could increase further until the fund year end in November.

VWENX-Vanguard Wellington Fund Admiral Shares | Vanguard

investor.vanguard.com

Fortunately, mine is in a Roth.

 

[Joylush]

If you sell it now do you still receive the distribution payout in December?

 

[SecondCor521]

If you sell it now do you still receive the distribution payout in December?

No. The distribution is paid out to shareholders who own shares on the record date. Looking at the distribution history for VWENX, it looks like the record date for the December payout will be sometime in December. Probably the day before the distribution.

 

[audreyh1]

If you sell it now do you still receive the distribution payout in December?

No. But you will probably realize a capital gain. I always compare my unrealized capital gain versus the predicted cap gains distribution on my old active funds which I am slowly getting rid of anyway.

 

[Delawaredave5]

Just checked and so far this year it looks like Wellington Admiral will have a 7.5% CG distribution in December. This could increase further until the fund year end in November.

VWENX-Vanguard Wellington Fund Admiral Shares | Vanguard

investor.vanguard.com

Thanks. What please is an "ETF equivalent" for Wellesley to use in an AT account?

Thanks!!

 

[dobig]

So if I buy VWELX in my after tax account between now and December I'm basically guaranteeing myself a safe 7.5% year end return barring a major market selloff?


Honestly, sounds good even for my taxable.

 

[5Miler]

So if I buy VWELX in my after tax account between now and December I'm basically guaranteeing myself a safe 7.5% year end return barring a major market selloff?


Honestly, sounds good even for my taxable.

Not a good plan especially in a taxable account. This is referred to as buying a dividend. You will be paying for the full NAV of the fund and when the distribution is accomplished, you will be taxed on your own money (the distribution), the NAV will decrease by the same amount. If you wait until after the distribution date to purchase, you take advantage of the lower NAV and pay no tax on a distribution. The only time it wouldn't matter is if you are in a 0% cap gains bracket or a tax free or tax deferred account. Still no advantage there as the increase in NAV providing the distribution happened prior to your purchase. That's when the money was made.

 

[dobig]

Not a good plan especially in a taxable account. This is referred to as buying a dividend. You will be paying for the full NAV of the fund and when the distribution is accomplished, you will be taxed on your own money (the distribution), the NAV will decrease by the same amount. If you wait until after the distribution date to purchase, you take advantage of the lower NAV and pay no tax on a distribution. The only time it wouldn't matter is if you are in a 0% cap gains bracket or a tax free or tax deferred account. Still no advantage there as the increase in NAV providing the distribution happened prior to your purchase. That's when the money was made.

Excellent idea I like even better.

I did notice my VYM and VYMI paid their dividends last night and both were up today. Shouldn't they have been down by the amount of the dividend aside from markets daily action?

 

[Joylush]

No. The distribution is paid out to shareholders who own shares on the record date. Looking at the distribution history for VWENX, it looks like the record date for the December payout will be sometime in December. Probably the day before the distribution.

Thank you. But isn’t it taxed at the lower rate being a dividend than at your regular tax rate? Or is it typically considered an unqualified dividend? I should know this already as I’ve owned it awhile but didn’t pay attention. (I just looked at my tax form and it seems like some of it is qualified and some is unqualified). So it’s more efficient than regular CD interest income I suppose.

 

[SecondCor521]

I did notice my VYM and VYMI paid their dividends last night and both were up today. Shouldn't they have been down by the amount of the dividend aside from markets daily action?

Yes, but that happens on the ex-div date, not the date the dividend was paid. VYM and VYMI both went ex-div on 9/20, not today.

You might not be able to see the effect because the dividends are pretty small compared to the share price.

 

[SecondCor521]

Thank you. But isn’t it taxed at the lower rate being a dividend than at your regular tax rate? Or is it typically considered an unqualified dividend? I should know this already as I’ve owned it awhile but didn’t pay attention. (I just looked at my tax form and it seems like some of it is qualified and some is unqualified). So it’s more efficient than regular CD interest income I suppose.

In the case of VWENX, it's a capital gains distribution, not a dividend. So I believe it is taxed at capital gains rates. Which are lower than ordinary rates.

Some mutual funds pay out a mixture of capital gains distributions, dividends, and interest. Dividends can be qualified or not depending on the holding period. Qualified dividends are taxed at capital gains rates; non-qualified dividends are taxed as ordinary income.

 

[I am He]

How do you find what that CG distribution is going to be? Where's it announced?

 

[audreyh1]

Each fund company typically publishes estimates per share and schedules later in the year on their website.

 

[G-Man]

Another question. How can I find mutual funds or ETFs that only pay out CG distributions and qualified dividends? These are more tax efficient being taxed at capital gain rates (hopefully long term and not short-term capital gain rates).

Non-qualified dividends and interest are taxed as ordinary income.

 

[Tadpole]

Almost all of my Wellington is in a Roth. I only have a tiny $11K that will seed this taxable distribution. I feel privileged.

 

[Chuckanut]

I suppose the Vanguard Wellington fund is a bit of a warning for 2024. I’ve been a bit worried about that. That plus my interest income YTD is quite a bit more than last years.

Oh well, it could kick us up to a higher IRMAA level for 2026.

I won’t really know until estimates which usually come out in Nov. but two funds which have paid LTCG distributions so far this year, they are 3x what they were this time last year.

IRMAA - an acronym for “success tax”.

 

[audreyh1]

IRMAA - an acronym for “success tax”.

In our case more like a penalty for still owning some investments that aren’t tax efficient.

 

[G-Man]

How can I find mutual funds or ETFs that only pay out CG distributions and qualified dividends? These are more tax efficient being taxed at capital gain rates (hopefully long term and not short-term capital gain rates).

Non-qualified dividends and interest are taxed as ordinary income.

 

[SecondCor521]

How can I find mutual funds or ETFs that only pay out CG distributions and qualified dividends? These are more tax efficient being taxed at capital gain rates (hopefully long term and not short-term capital gain rates).

Non-qualified dividends and interest are taxed as ordinary income.

I don't know of any screeners. But buying and holding (*) stock index funds or the equivalent ETFs is going to get you about 99% of the way there.

My VFIAX and VTSAX in my taxable account in 2023 paid out dividends that were 96% qualified dividends and 4% Section 199A dividends, both of which are treated well by the tax code. $0 nonqualified and $0 interest.

(*) Whether a dividend is qualified is determined by the holding period of ~120 days surrounding the dividend payment. With mutual funds I can never recall if that means that the mutual fund has to hold the investment that paid the dividend or if you have to hold the mutual fund shares that received the dividend distribution, or both. cathy63 probably knows.

 

[homestead]

How can I find mutual funds or ETFs that only pay out CG distributions and qualified dividends? These are more tax efficient being taxed at capital gain rates (hopefully long term and not short-term capital gain rates).

Non-qualified dividends and interest are taxed as ordinary income.

Vanguard funds have "Tax-Managed" in the fund name.
Here is the one I use. Don't think I have had any capital gains only dividends.

Vanguard Tax-Managed Balanced Adm VTMFX​

 

[G-Man]

I don't know of any screeners. But buying and holding (*) stock index funds or the equivalent ETFs is going to get you about 99% of the way there.

My VFIAX and VTSAX in my taxable account in 2023 paid out dividends that were 96% qualified dividends and 4% Section 199A dividends, both of which are treated well by the tax code. $0 nonqualified and $0 interest.

(*) Whether a dividend is qualified is determined by the holding period of ~120 days surrounding the dividend payment. With mutual funds I can never recall if that means that the mutual fund has to hold the investment that paid the dividend or if you have to hold the mutual fund shares that received the dividend distribution, or both. cathy63 probably knows.

Thanks

 

[G-Man]

Vanguard funds have "Tax-Managed" in the fund name.
Here is the one I use. Don't think I have had any capital gains only dividends.

Vanguard Tax-Managed Balanced Adm VTMFX​

Thanks

 

[The HalfBreed]

I have Wellesley in a ROTH IRA, but Wellington in a taxable account since 2010. I used to reinvest and pay the taxes on it, but in the last 4 years, I decided to take the dividends and CG's and pay taxes on it at 15%, subtract 15% from the payouts, and give the rest to my 2 children. May as well let them enjoy it. They'll get it when I die.