I disagree that one cannot spend their dividends AND their RMDs. In fact, most can spend MORE than that. And the right place to get it is often the appreciated shares in a taxable account, even if there 20 years of LTCGs associate them. I totally disagree that it is "too expensive to sell at that point."Depending on what age they retire, which is usually around 60, two things happen that are very difficult to undo.
1. SS starts, and to some they don't understand how SS is taxed and that dividends aren't now tax-free. Not much of a problem if they don't spend down their TIRA at this time, but that is creating a bigger problem down the road...
2. RMDs - If your TIRA was not too overly large you can spend the RMDs, but you can't spend the taxable dividends as well (you can't follow the #3 strategy above that you (and I) said was important.
You look around and there is really very little you can do because you have 15-20+ years of LTCG in each of the investments you own so it is too expensive to sell at that point.
If you had planned properly from day 1 of the taxable account, you would have not put LC dividend plays in there in the first place. Since LTCG are just as good you should see that dividends aren't the right play.
I mean, let's take a look at it. Say you bought $10K worth of stock and it has now appreciated to $50K. So $40K of gains. Even if you're in the 15% bracket and not the 0%, that's 15%*$40,000 = $6,000. Why in the world would that be "too expensive" to sell? What's the alternative, die the richest guy in the graveyard? Pull more from a traditional IRA (on which you might pay $9-10K in taxes)?
Statistics: Posted by White Coat Investor — Thu Jul 25, 2024 1:40 pm — Replies 76 — Views 6374