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Just for clarification. Dividends are only treated differently than capital gains if they are in a taxable account AND your total taxable income is in the 25% tax bracket or greater. That means for MFJ with just standard deductions your gross income would need to be above $95k. Not many retired folks are going to have that problem. Because we contribute so much to our tax deferred accounts we are about to be well below the $75k threshold. I am actually going to start realizing capital gains on some of my investments up to the threshold and buying again. This way I lock in my purchase price at a much higher point in case we can't mathematically get under the $75k in the future.
Most retirees have all their investment money in retirement plans. Only those with substaintial assets tend to have brokerage accounts with any meaningful amounts of money and they tend to have higher incomes.
Nof all dividends from funds are qualified either. There are two parameters involved. Whether they meet the funds requirements to be qualified as well as whether they meet the requirementts of you personally and your holding periods .
Becareful too . The way zero capital gains work can be tricky .
As an example . All other income fills up the bucket first . 60k regular taxable income after deductions and 20k in capital gains . 60k goes in first leaving only 12k or so,for
for any more zero capital gains items to be put in .
Last edited by mathjak107; 09-14-2016 at 06:58 AM..
Most retirees have all their investment money in retirement plans. Only those with substaintial assets tend to have brokerage accounts with any meaningful amounts of money and they tend to have higher incomes.
Nof all dividends from funds are qualified either. There are two parameters involved. Whether they meet the funds requirements to be qualified as well as whether they meet the requirementts of you personally and your holding periods .
Becareful too . The way zero capital gains work can be tricky .
As an example . All other income fills up the bucket first . 60k regular taxable income after deductions and 20k in capital gains . 60k goes in first leaving only 12k or so,for
for any more zero capital gains items to be put in .
I have a good amount of money in brokerage accounts ~$100k, have a HH gross income of over $130k and we can pretty easily get below the 25% tax bracket. I expect that to go up substantially considering we are only 33 and 31.
I know how the taxes work. We put as much as is necessary in traditional IRAs to ensure we don't pay any taxes in LTCGs and/or qualified dividends each year. You can just move money back and forth between traditionals and roths up to April 15th. I also prefer to keep my investments that pay dividends in my roth and traditional accounts, so we only realize a couple K in qualified dividends in our brokerage every year.
Most dividends that aren't qualified aren't actually dividends. Most of them are from Master Limited Partnerships or similar investments like trusts, so technically you are part of a partnership and are paid a portion of the earnings. That is clearly up to the investor to figure out, but there are very few large caps that do not pay out dividends that would be considered qualified after the required holding period.
Last edited by mizzourah2006; 09-14-2016 at 07:21 AM..
Dividends from funds can have more unqualified than qualified. What you say is only true of individual stocks.
The 1 year holding period does not apply to dividends . There are holding time frames required by the funds as well as you as well as time frames of ownership prior to issuing a dividend .
We usually have more unqualified dividends from funds because funds trade. Even index funds have issues . Most do not own everything in the index . They swap in and out of issues as they are added or dropped as well as tryto capture index returns without owning the index
I suggest you google the parameters for having dividends qualified even from stocks. 1 year holdings do not apply . That is only for capital gains not dividends.
Dividends have their own rules. I think they are 120 day ownership time frames and they are calculated based on when you bought the stock relative to the declaration date.
It also matters from where the stock got its income or part of its income.
Folks get confused on the 1 year ownership requirement thinking it apply's to dividends. It does not
Good thing I only own index funds and individual stocks in my brokerage accounts then.
Some index funds have terrible distributions that are taxable. Vanguard is the lowest but some do a lot of trading to mimic the index without owning everything in the index.
I am away in nashville for a few days , but when i get home i can post the bad index funds to own.
Being a drummer it was time to visit the land of my people.
Some index funds have terrible distributions that are taxable. Vanguard is the lowest but some do a lot of trading to mimic the index without owning everything in the index.
I am away in nashville for a few days , but when i get home i can post the bad index funds to own.
Being a drummer it was time to visit the land of my people.
Just be careful. I know so many who retired and made portfolio changes and ended up with tax torpedo's from years and years of pent up gains which had little to no taxes paid along the way.
Had we been indexed for 30 years we would have been in that situation when we revamped our portfolio for retirement .
Luckily they were managed funds that not only beat indexing but the taxes were bad but not to bad when we made our changes since we did pay some taxes over the years on them
I'm very new to investing and still trying to get my bearings. The people here seem very knowledgeable. I've read through this thread twice now and still don't understand. What is an income investor? How does this differ from someone who invests predominately in Index Funds?
My portfolio has also taken a hit this past week. I'm not that concerned as it's only $100 lost, but I'd obviously prefer to see the numbers trending up, not down. I still plan on putting ~2k/month into my Wealthfront account, but is there anything else I should do to diversify my portfolio?
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