Announcement

Collapse
No announcement yet.

Taxable account divident re-investment

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Taxable account divident re-investment

    Hey everyone - I was hoping to get your advice on something. I'm a current PGY-3 in medicine, and thanks to everyone's advice here previously, I have been maxing out my roth IRA and roth 403B for the past 2 years which have grown very nicely thanks to covid.
    I recently came into a chunk of unexpected change from my grandpa who generously gifted me a 15K. I don't have any current need for this money, so I decided to open a taxable account and put it all in VTI (I am willing to tolerate market ups and downs for foreseeable future with no plans on cashing out). My question is regarding what to do with the dividends - do I collect them or do I just re-invest them back?
    Thank you for your help.

  • #2
    Reinvest

    Comment


    • #3
      Agreed, auto reinvest is best. Maybe later, if you want to be able to rebalance or tax loss harvest, you can keep the dividends separate. But for the foreseeable future reinvest them for best growth.

      Comment


      • #4
        DRIP those dividends. As said above by another, it'll help with growth. It'll also save you a headache since you won't have to decide when to invest these dividends and instead just DRIP them as they come thus giving you more TIME in the market which normally beats out TIMING the market.

        Comment


        • #5
          reinvest the dividends until the account becomes large enough to take advantage of tax lost harvesting , then I would turn it off and have the dividends go into another account of your choice

          Comment


          • #6
            I discontinued DRIP investing in my taxable accounts years ago at my accountant's urging. It's a headache to calculate cost basis when selling.

            I still do DRIP in my non-taxable accounts.

            Comment


            • #7
              Originally posted by Mitchel674 View Post
              I discontinued DRIP investing in my taxable accounts years ago at my accountant's urging. It's a headache to calculate cost basis when selling.

              I still do DRIP in my non-taxable accounts.
              I don't know where you invest, but at Vanguard at least this is absolutely not a problem. Use specific lot identification as your cost basis and this is done automatically.

              Comment


              • #8
                In general, it's a good idea to reinvest, but money is fungible, so once you've been issued the dividend, only reinvest if you have no better use for that money. You're going to pay taxes on the dividend whether your reinvest it or not.

                When it comes time to do any tax loss harvesting, you'll want to switch from automatic dividend reinvestment to manual to avoid any wash sale issues. Up to you if you want to do that from the beginning or start with auto-reinvestment until the time comes that you have a TLH opportunity.
                Tax loss harvesting is a powerful tool that can save you thousands of dollars in taxes. I show a step by step example of a tax loss harvest with Vanguard.

                Comment


                • #9
                  Originally posted by Larry Ragman View Post

                  I don't know where you invest, but at Vanguard at least this is absolutely not a problem. Use specific lot identification as your cost basis and this is done automatically.
                  Also tracking the basis by brokerages has been a requirement since 2012. So regardless of your method of sale (lots, FIFO, etc) this should all be very easy. For those purchases before 2012 I agree - what a royal PITA.

                  Comment


                  • #10
                    Originally posted by ENT Doc View Post

                    Also tracking the basis by brokerages has been a requirement since 2012. So regardless of your method of sale (lots, FIFO, etc) this should all be very easy. For those purchases before 2012 I agree - what a royal PITA.
                    I had no idea when I first started investing that I needed to track the purchase price of my mutual fund shares since Vanguard wasn't doing it for me. Since I started investing in 2001, this is a real headache. I've considered switching over to Specific Lots as my cost basis and using those pre-2012 shares for charitable donations, but I suspect I have far too many pre-2012 shares to give them all away, so I've stuck with Average Cost for my cost basis just because of this issue.

                    How are the rest of you handling this issue of pre-2012 shares if you (like me) don't have the purchase records?
                    Last edited by artemis; 09-28-2021, 08:38 AM.

                    Comment


                    • #11
                      Originally posted by artemis View Post

                      i had no idea when I first started investing that I needed to track the purchase price of my mutual fund shares since Vanguard wasn't doing it for me. Since I started investing in 2001, this is a real headache. I've considered switching over to Specific Lots as my cost basis and using those pre-2012 shares for charitable donations, but I suspect I have far too many pre-2012 shares to give them all away, so I've stuck with Average Cost for my cost basis just because of this issue.

                      How are the rest of you handling this issue of pre-2012 shares if you (like me) don't have the purchase records?
                      Good question. I'm also interested in what others will do. I plan to use "Various" for the date and declare them to be LTCG whenever the time comes. That is how Vanguard reports those shares. I can't see how the IRS would object since they will all be pre-2012. Though a big chunk will definitely go to my DAF when the time comes.

                      Comment


                      • #12
                        Originally posted by Larry Ragman View Post

                        Good question. I'm also interested in what others will do. I plan to use "Various" for the date and declare them to be LTCG whenever the time comes. That is how Vanguard reports those shares. I can't see how the IRS would object since they will all be pre-2012. Though a big chunk will definitely go to my DAF when the time comes.
                        This is an interesting enough question that I've decided to post a thread about it instead of just hijacking this one. See you in the new thead!

                        Comment


                        • #13
                          I don't reinvest, due to TLH. It accumulates in money market and then is invested with my periodic taxable additions

                          Comment


                          • #14
                            thanks guys!

                            Comment

                            Working...
                            X