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I really like VER-F (when below par) because it pays monthly. Very few preferreds do that. To get my 'fix' on monthly paying income investments, I go for the CEF's. Almost all pay monthly.
In a taxable account, obviously you have to pay more attention to tax consequences. There are a lot of qualified preferreds out there. NI-B (utility) just came out with a qualified cumulative preferred. I have some Bank of America BAC-B in my Dad's taxable account. It's slightly over par now but pays almost 6% in qualified dividends.
Last edited by Newporttom; 01-05-2019 at 10:15 AM..
As far as taxes, I have moved all of my IRA's into Roths. Did a mega-conversion in 2018 of about $165,000 worth. So there are no tax consequences for me in any of these moves.
Quote:
Originally Posted by artillery77 View Post
"In Oct, I bought $1,800 worth of a BDC and my income went up $210."
Is this $210 per year?
Yes it is, but I want to be clear on something. I usually get about $75-80 a month in increases from things that reinvest automatically. When I buy something it's on top of that $75-$80 to come up with the numbers I stated.
To me there's a real sweet spot around 6%-7% where you can buy preferred and CEF's without too much risk. I really like DNP and UTF.
I think you misunderstand. I said it was a helpful post and, if someone needs the income, this is definitely a way to grow income. I was inquiring about his statement that he didn't need the income and how tax effective it was after payment of income taxes. He later responded that he does this within a Roth which makes sense.
Nowhere did I advocate for muni's. There are other investment vehicles for capital appreciation without regular income subject to federal and local taxes. I always consider the net of an investment not the gross. It's not just about the taxes but the compounding of a tax deferred investment.
My bad. Apologies Maddie. I'm excited to learn more in the area and didn't want it derailed with another pro/con dividend talk. I got overly excited there.
A follow up. Income increased by $177 in January. Made no other purchases. The rest was DRIPs.
Ver-F slightly above par again at 25.05.
HT-D still super cheap at 21.00
INN-E still super cheap at 21.53
The NI-B I mentioned went to $26.99 so it's no bargain anymore (in my mind)
BAC-B went to $25.94 so getting a little pricey also.
The downturn actually ended up being a non event .. we set our years goal posts for spending budget in january every year since we are retired ..
we use bob clyatts 95/5 method of determining a safe withdrawal rate ..
we take 4% of the balance at years end or if a down year 5% less then the previous year , which ever is higher ..
we were slated for a 5% cut in pay for 2019 but the powerful january we had put us back to the same draw as last year so being it was still january and we just made the adjustments we did not need to take a 5% cut ...
I really like VER-F (when below par) because it pays monthly. Very few preferreds do that. To get my 'fix' on monthly paying income investments, I go for the CEF's. Almost all pay monthly.
In a taxable account, obviously you have to pay more attention to tax consequences. There are a lot of qualified preferreds out there. NI-B (utility) just came out with a qualified cumulative preferred. I have some Bank of America BAC-B in my Dad's taxable account. It's slightly over par now but pays almost 6% in qualified dividends.
Awesome information, thanks for sharing. Any other resources you’d recommend for building a diversified income portfolio to include preferred shares, MLPs, REITs, equities, etc?
Helpful post. I often wondered if this is a tax efficient strategy. Receiving income when you don't need it and paying taxes on it. Is the income all long-term capital gains and taxed at those rates?
That's why I am a growth investor.
I accumulate wealth silently, and when I do need money I sell as much stock as I need to and take long term capital gain on it.
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