Author Topic: ER and handling dividends - What are you doing?  (Read 1133 times)

Holyoak

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ER and handling dividends - What are you doing?
« on: October 31, 2016, 12:18:35 PM »
I have read what seems a lot of opinions on dividend handling, many of which apply to younger folks still working, or older folks retired at a more traditional age.  I'm 50, been ER for a few years, and have a pretty typical 60% stock/40% bond portfolio held at VG, with about 10% in individual stocks.  The taxable portion of the VG mix along with individual stocks, results in about $22k in annual payments, all of which is rolled back into buying more shares of the particular investment.  FWIW, my annual spending is about 2% of the portfolio.

I kind of like the idea of simply having the dividend payment deposited into an account, where I can decide later where to invest, or for use with daily expenses, not to mention perhaps easier accounting...  But also like the idea of continuing to basically dollar cost average into the investment vehicle, since I am only 50.  I also wonder about tax impact, with either choice?  Appreciate your insights and help.  Thanks.,

ZiziPB

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Re: ER and handling dividends - What are you doing?
« Reply #1 on: October 31, 2016, 02:17:47 PM »
Tax treatment doesn't change one way or the other. 

I like the dividends in the taxable account to be paid in cash.  It gives me more control over things like tax loss harvesting and flexibility in terms of rebalancing.

Proud Foot

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Re: ER and handling dividends - What are you doing?
« Reply #2 on: October 31, 2016, 02:44:58 PM »
No difference in tax treatment for either way.

Since you're already ER it makes sense to not reinvest your dividends in your taxable accounts.  Makes the accounting for short term/long term capital gains easier as well as providing you for your cash needs without requiring you to sell any investments (my understanding is your expenses are less than the 22k in dividends from the taxable account).

RJCPA614

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Re: ER and handling dividends - What are you doing?
« Reply #3 on: October 31, 2016, 02:49:29 PM »
Agree with previous posters that tax treatment will be the same either way in a taxable account.

Once the dividend amounts become meaningful, my personal preference is to have them paid in cash as well.

One thing to consider regarding the individual stocks, however, would be whether commissions could be avoided by automatic reinvestment.  If you were fairly confident that you planned to reinvest the dividends, it may make more sense to reinvest the dividends if a commission could be avoided.  Depending on the amounts involved, this may be a negligible concern, however.

MDM

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Re: ER and handling dividends - What are you doing?
« Reply #4 on: October 31, 2016, 07:15:46 PM »
Places in which we are overweight (e.g., individual stock) we take the dividend in cash, for living expenses.

Places in which we are underweight or in line with our preferred asset allocation we reinvest, for simplicity.