Author Topic: Where would you put dividend stock/fund?  (Read 717 times)

mistymoney

  • Pencil Stache
  • ****
  • Posts: 770
Where would you put dividend stock/fund?
« on: May 01, 2019, 07:20:41 AM »
On what basis would you put dividends into 401k rollover, roth, or taxable?

And how would current age and projected retirement age influence that decision?


the_gastropod

  • Bristles
  • ***
  • Posts: 260
  • Age: 34
  • Location: Brooklyn, NY
Re: Where would you put dividend stock/fund?
« Reply #1 on: May 01, 2019, 07:48:12 AM »
As a general rule of thumb, youíll want to put income-generating assets (like bonds or high dividend stocks) in a retirement account so you donít have to pay tax on the distributions. Additionally, itís generally advised to put slower growth assets (e.g. bonds) in a traditional retirement account, and high growth assets (stocks) in Roth accounts if you have them. The reasoning is that youíll pay taxes on withdrawals from the traditional account, but not the Rothóso youíll minimize your tax burden by following this strategy, theoretically. However, if youíre like many mustachians, your annual expenses will be low enough so as to keep a nearly-0 tax burden in retirement. If this is the case for you, just going 100% traditional retirement account is the way to go, putting any additional savings into taxable brokerage accounts.

radram

  • Pencil Stache
  • ****
  • Posts: 955
Re: Where would you put dividend stock/fund?
« Reply #2 on: May 01, 2019, 07:49:17 AM »
On what basis would you put dividends into 401k rollover, roth, or taxable?

And how would current age and projected retirement age influence that decision?

I am not exactly clear on what you are asking.

Dividends generated WITHIN a qualified tax deferred account can remain there, and are not considered income the year they are earned. You can buy more shares with them, let them sit in cash, buy CD's, etc.

Dividends received in a taxable account can not be placed into a qualified account, because they are not considered earnings. Only earnings from working can be placed in an IRA, 401k, Roth, or any other qualified account.

A rollover is simply moving money from one account to another, often done for tax purposes, simplicity of management or some other benefit.

I hope this helps.

mistymoney

  • Pencil Stache
  • ****
  • Posts: 770
Re: Where would you put dividend stock/fund?
« Reply #3 on: May 01, 2019, 08:22:35 AM »
On what basis would you put dividends into 401k rollover, roth, or taxable?

And how would current age and projected retirement age influence that decision?

I am not exactly clear on what you are asking.

Dividends generated WITHIN a qualified tax deferred account can remain there, and are not considered income the year they are earned. You can buy more shares with them, let them sit in cash, buy CD's, etc.

Dividends received in a taxable account can not be placed into a qualified account, because they are not considered earnings. Only earnings from working can be placed in an IRA, 401k, Roth, or any other qualified account.

A rollover is simply moving money from one account to another, often done for tax purposes, simplicity of management or some other benefit.

I hope this helps.

oh - I was wondering about dividends in the taxable acct - and if that was good to do if you were retiring very early so you had that income before being eligible for the retirement accts, or if it was good to put them there anyway, or not good either way.

cincystache

  • Bristles
  • ***
  • Posts: 284
Re: Where would you put dividend stock/fund?
« Reply #4 on: May 01, 2019, 07:44:21 PM »
You're probably splitting hairs a little but it kind of depends on your income. For example, if you are married, filing jointly and your household income is around 100k or less you don't pay any taxes on qualified dividends or long term capital gains so holding dividend stocks in taxable accounts is completely fine. 

@the_gastropod is spot on about everything too.

radram

  • Pencil Stache
  • ****
  • Posts: 955
Re: Where would you put dividend stock/fund?
« Reply #5 on: May 02, 2019, 08:21:47 AM »
On what basis would you put dividends into 401k rollover, roth, or taxable?

And how would current age and projected retirement age influence that decision?

I am not exactly clear on what you are asking.

Dividends generated WITHIN a qualified tax deferred account can remain there, and are not considered income the year they are earned. You can buy more shares with them, let them sit in cash, buy CD's, etc.

Dividends received in a taxable account can not be placed into a qualified account, because they are not considered earnings. Only earnings from working can be placed in an IRA, 401k, Roth, or any other qualified account.

A rollover is simply moving money from one account to another, often done for tax purposes, simplicity of management or some other benefit.

I hope this helps.

oh - I was wondering about dividends in the taxable acct - and if that was good to do if you were retiring very early so you had that income before being eligible for the retirement accts, or if it was good to put them there anyway, or not good either way.

Ah... now I think I understand your question. You are asking where to buy investments that throw off dividends. In that case, +1 for @the_gastropod.