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We are a retired couple -- both on SS and my husband has RMD's from his IRA. I will wait until age 70 to start my IRA. We have several taxable funds that we have begun taking the dividends and capital gains to supplement our other income and it is working out just fine. But we have one fund -- CGM Mutual -- that is NOT a good fit and has very high expenses and we don't quite know what to do with it because if we sell we will get hit with taxes pretty hard and don't want that. So I was thinking of changing all our other funds to reinvest and over a 4 year period sell the CGM to supplement our income. This would get rid of the fund over time and let the other, better funds (Vanguard Wellington, TRowePrice Spectrum Income, Vanguard Life Strategy Moderate Growth and Gabelli Asset) all grow. Am I missing something or any other suggestions? Still trying to stay in the 22% tax bracket.
We are a retired couple -- both on SS and my husband has RMD's from his IRA. I will wait until age 70 to start my IRA. We have several taxable funds that we have begun taking the dividends and capital gains to supplement our other income and it is working out just fine. But we have one fund -- CGM Mutual -- that is NOT a good fit and has very high expenses and we don't quite know what to do with it because if we sell we will get hit with taxes pretty hard and don't want that. So I was thinking of changing all our other funds to reinvest and over a 4 year period sell the CGM to supplement our income. This would get rid of the fund over time and let the other, better funds (Vanguard Wellington, TRowePrice Spectrum Income, Vanguard Life Strategy Moderate Growth and Gabelli Asset) all grow. Am I missing something or any other suggestions? Still trying to stay in the 22% tax bracket.
Not a bad idea to spread out the sales.
But you will be taxed on the dividend in the taxable account even though your reinvest them.
Depending on your income some capital gains may not be taxed. Redo this years return and add in sales of the fund and see what happens to your taxes.
Look for the tax return work sheet Qualified dividends and Capital Gains Tax Worksheet.
I would google and you might find some articles written in English that will explain what is happening.
By the way you might not be paying taxes on your current dividends due to this worksheet.
Not a bad idea to spread out the sales.
But you will be taxed on the dividend in the taxable account even though your reinvest them.
Depending on your income some capital gains may not be taxed. Redo this years return and add in sales of the fund and see what happens to your taxes.
Look for the tax return work sheet Qualified dividends and Capital Gains Tax Worksheet.
I would google and you might find some articles written in English that will explain what is happening.
By the way you might not be paying taxes on your current dividends due to this worksheet.
Yes thanks for your reply. We do realize about being double taxed -- on the sales of the bummer fund as well as the reinvested dividends for our current taxable funds. It will increase our income but we are trying to keep it within a certain parameter so as not to affect Medicare, etc. We do not have a ton in the fund -- say $140,000 -- so we could sell $35,000 each year over 4 years. It is a dilemma -- trying to unload bad funds bought before we got smarter. Sometimes inertia takes over and you just stay with the crummy situation -- but looking at the expenses of CGM Mutual as well as the holdings -- I think it is time to BAIL.
Am I missing something or any other suggestions? Still trying to stay in the 22% tax bracket.
If you donate to charity, you could open a donor-advised fund with Fidelity or Schwab and use some or all of the CGM Mutual shares to fund the account.
If you donate to charity, you could open a donor-advised fund with Fidelity or Schwab and use some or all of the CGM Mutual shares to fund the account.
That is an excellent idea. We have such a fund at Fidelity and used our highest appreciated stocks to fund it (at least until we hit RMD age and use IRAs for QCDs).
Yes thanks for your reply. We do realize about being double taxed -- on the sales of the bummer fund as well as the reinvested dividends for our current taxable funds. It will increase our income but we are trying to keep it within a certain parameter so as not to affect Medicare, etc. We do not have a ton in the fund -- say $140,000 -- so we could sell $35,000 each year over 4 years. It is a dilemma -- trying to unload bad funds bought before we got smarter. Sometimes inertia takes over and you just stay with the crummy situation -- but looking at the expenses of CGM Mutual as well as the holdings -- I think it is time to BAIL.
You dont get double taxed. Any reinvestments get counted towards your basis when calculating any gain/loss upon a sale.
But we have one fund -- CGM Mutual -- that is NOT a good fit and has very high expenses and we don't quite know what to do with it because if we sell we will get hit with taxes pretty hard and don't want that.
Taxes are the price we pay to live in a civilized society. Sell, pay your taxes, and move on.
Taxes are the price we pay to live in a civilized society. Sell, pay your taxes, and move on.
Being smart about paying taxes does no mean I am against the idea of taxation -- but I do want to LEGALLY and intelligently utilize every strategy to minimize the money I give to the government.
They seem to have a VERY easy time spending spending other people's money.
We are doing something similar. We took over our accounts from our broker 6 years ago. We have two mutual funds which are open end with high expenses. One in particular has very high expenses.
We have been using that fund to draw our RMD's until it disappears!
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