How should I be using my dividends?

I have a portfolio containing $800,000. I do not need to take any money out for living expenses. My wife and I have Social Security and pensions of $110,000, plus rental income clearing $35,000 a year. Should I be taking my dividends in cash or should I re-invest?

Social Security, Investing, Asset Allocation
Answers
Sort By:
Most Helpful
last month
100% of people found this answer helpful

Hello,

Looks like you’re in a good financial shape, especially considering your lifetime income is set through social security and pension.  However, the AGI is getting awfully close to the $170k, the threshold for the Medicare surcharges for the part B and D.  

The question is not about if you should reinvest the dividends or not, as either way (takes dividends or reinvest it) you are taxed annually if the investment is in a taxable account.  So, a tax-efficient taxable account should be in a top priority.

 

On the other hand, if the dividends generated from a tax-deferred account, such as a 401k or IRA, you may dodge the bullet for now, or until you reach 70 ½.  When the time comes, you’ll be forced to withdraw in compliance to the RMD requirement, which further boosts your AGI.  To minimize that impact, you need to start plan now to see if any Roth conversion would help the possibility.  This may require a few consultations with a CFP® or RICP ® professionals to map out a plan with some backup plans as well.  Best

September 2017
September 2017
September 2017
September 2017