The 0.23% is 15% of the 1.5% dividend yield. This is the percentage you will lose to taxes every year that you hold this fund.EDIT. I just deleted a long post I had to you where I tried to get a grip on that 0.23% and apply it in spread sheet. I'm gonna try again later today or tomorrow as I think I've wrapped my head around it and the variables needed for the calculation. I'm hoping to get your response once I get my ducks in a row.If the dividend yield is 1.5%, all qualified, then leaving the money in taxable will cost 0.23% per year. If this lasts 30 years, you will lose 7% in taxes compared to the 30 years of tax-free growth. So it is close to break-even whether to fund the Roth IRA or leave the stock to your son.
Normally, when I compute the tax cost of a stock fund, I also include the capital gains due on sale, but the OP intends to leave the fund to their heirs, so there will be no capital-gains tax due.
Statistics: Posted by grabiner — Thu Aug 29, 2024 11:37 pm — Replies 46 — Views 2685