Around 43K in dividends last year - feel good about it ?

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Leif
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leif » Fri Jan 11, 2019 12:27 pm

Perhaps I don't understand the OPs question, because I sure don't understand many of the responses. The OP has equity in both retirement accounts and taxable. They distribute dividends. $14K of which was in taxable, thus subject to possible taxes. The equity market was down in 2018. Is this all agreed to?

Is the goal to reduce/eliminate the $14K in taxable dividends and thus reduce taxes? Are the suggestions that the OP change his equities to accomplish this goal? If so, how?

If the OP is in a high tax bracket he might benefit from a tax managed fund. But to get there he would need to sell his current equities which may produce additional taxable income.

I reinvest my dividend income in additional shares. I'm also buying additional equity in my taxable account as money becomes available. I try to stick with index funds for diversification and generally low capital gains due to low turn over among other things.
Last edited by Leif on Fri Jan 11, 2019 12:44 pm, edited 1 time in total.

dbr
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Re: Around 43K in dividends last year - feel good about it ?

Post by dbr » Fri Jan 11, 2019 12:43 pm

Leif wrote:
Fri Jan 11, 2019 12:27 pm
Perhaps I don't understand the OPs question, because I sure don't understand many of the responses. The OP has equity in both retirement accounts and taxable. They distribute dividends. $14K of which was in taxable, thus subject to possible taxes. The equity market was down in 2018. Is this all agreed to?

Is the goal to reduce/eliminate the $14K in taxable dividends and thus reduce taxes? Are the suggestions that the OP change his equities to accomplish this goal? If so, how?

If the OP is in a high tax bracket he might benefit from a tax managed fund. But to get there he would need to sell his current equities which may produce additional taxable income.

I (given my tax situation) reinvest my dividend income in additional shares. I'm also buying additional equity in my taxable account as money becomes available. I try to stick with index funds for diversification and generally low taxable income due to low turn over among other things.
Yes, correct. The OP seemingly wants to go from a situation where there is some tax cost to a nirvana where there is no tax cost. As you suggest low turnover index funds are about as tax efficient as it gets, possibly excepting a one-off such as BRK.

An alternative if one just doesn't want any taxable income is to put all the taxable allocation in munis specific to one's state. Even then any realized capital gains are still taxed. That is not necessarily the life-long optimum for the entire investment plan either. Getting everything into a Roth is another approach. Another way to avoid the taxes is to give the assets now to someone who is going to get them in the long run anyway.

The tax code is written so that there are not a lot of obvious loopholes that can just be walked through by anyone. If the burden is large enough one can hire a tax accountant and a tax lawyer to figure out some options. {political comment deleted by author}

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Leif
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leif » Fri Jan 11, 2019 12:53 pm

dbr wrote:
Fri Jan 11, 2019 12:43 pm
Yes, correct. The OP seemingly wants to go from a situation where there is some tax cost to a nirvana where there is no tax cost. As you suggest low turnover index funds are about as tax efficient as it gets, possibly excepting a one-off such as BRK.
The only other option I can think of, and keep it inside taxable and hold equities, is to buy individual stocks that do not distribute dividends. You control the capital gains by your timing of when to sell. But, you give up diversification, unless you really have a ton of money and a lot of time on your hands. This is really having the tax tail wagging the investment dog.
Last edited by Leif on Fri Jan 11, 2019 12:58 pm, edited 1 time in total.

Leesbro63
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leesbro63 » Fri Jan 11, 2019 12:58 pm

skor99 wrote:
Thu Jan 10, 2019 7:29 pm
My portfolio threw around 43K total dividends in 2018 ( was around 36K in 2017). Around 14 k is taxable. This number does not include cap gains distribution by mutual funds.
On one hand it feels good to see this stream of income coming in , but on the other I am still down by 90K for 2018 even after including this. Should I still be happy to see a positive flow that would hopefully keep going up or atleast stay steady barring a big economic downturn? I know people advice to only look at total returns, but didn’t this income stream make my total returns less negative than what it would be otherwise ?
Why aren’t ALL the dividends taxable?

dbr
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Re: Around 43K in dividends last year - feel good about it ?

Post by dbr » Fri Jan 11, 2019 1:10 pm

Leesbro63 wrote:
Fri Jan 11, 2019 12:58 pm
skor99 wrote:
Thu Jan 10, 2019 7:29 pm
My portfolio threw around 43K total dividends in 2018 ( was around 36K in 2017). Around 14 k is taxable. This number does not include cap gains distribution by mutual funds.
On one hand it feels good to see this stream of income coming in , but on the other I am still down by 90K for 2018 even after including this. Should I still be happy to see a positive flow that would hopefully keep going up or atleast stay steady barring a big economic downturn? I know people advice to only look at total returns, but didn’t this income stream make my total returns less negative than what it would be otherwise ?
Why aren’t ALL the dividends taxable?
The OP didn't say. Some possibilities include that the holdings were in a Roth (tax free) or in an IRA/401k (tax deferred) or some similar such accounts. Maybe he meant something else entirely.

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Toons
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Re: Around 43K in dividends last year - feel good about it ?

Post by Toons » Fri Jan 11, 2019 1:12 pm

Enjoy your dividends and cap gains
Everyone should have such issues....feeling good :mrgreen:
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WhiteMaxima
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Re: Around 43K in dividends last year - feel good about it ?

Post by WhiteMaxima » Fri Jan 11, 2019 1:14 pm

Can OP live on $43k dividend? With standard deduction at $24k. They probably owe very little taxes.

Leesbro63
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leesbro63 » Fri Jan 11, 2019 1:16 pm

WhiteMaxima wrote:
Fri Jan 11, 2019 1:14 pm
Can OP live on $43k dividend? With standard deduction at $24k. They probably owe very little taxes.
You're assuming they have no other income.

FinancialRookie
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Re: Around 43K in dividends last year - feel good about it ?

Post by FinancialRookie » Fri Jan 11, 2019 1:52 pm

Tycoon wrote:
Fri Jan 11, 2019 8:21 am
livesoft wrote:
Fri Jan 11, 2019 8:15 am
I'd rather have $14,000 in untaxed gains than $14,000 in taxed dividends. Some taxpayers realize that those dividends can create even more taxes on Social Security, increase Medicare premiums, reduce tax credits, and push one over a tax cliff.
I agree with this. Needlessly paying taxes is just plain dumb.
Sure. But if the OP is investing in his tax free and pre tax accounts and then the extra in taxable is that worse than not investing that extra because you potentially pay taxes on dividends? That would be dumb as well. He has managed to save a substantial amount of assets and we would all love to pay 0 taxes on our money. To the average American having to deal with this "problem" would be quite a blessing.

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Re: Around 43K in dividends last year - feel good about it ?

Post by livesoft » Fri Jan 11, 2019 1:53 pm

Leif wrote:
Fri Jan 11, 2019 12:27 pm
Perhaps I don't understand the OPs question, because I sure don't understand many of the responses.
I took the OP's question at face value: Should they feel good about it?

We have more taxable dividends, but I don't feel good about it myself. Our dividends are mostly qualified, so we don't pay taxes on them. We can fudge that we don't pay taxes on non-qualified dividends because the foreign tax credit covers most of the taxes owed on our non-qualified dividends and the taxes saved from tax-loss harvesting can be said to cover all the rest and more.

We don't have a full picture of the OP's tax situation, but I also suspect that the OP does not have a full picture of their tax situation either. Whether it matters or not, who knows?
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Trader Joe
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Re: Around 43K in dividends last year - feel good about it ?

Post by Trader Joe » Fri Jan 11, 2019 2:08 pm

skor99 wrote:
Thu Jan 10, 2019 7:29 pm
My portfolio threw around 43K total dividends in 2018 ( was around 36K in 2017). Around 14 k is taxable. This number does not include cap gains distribution by mutual funds.
On one hand it feels good to see this stream of income coming in , but on the other I am still down by 90K for 2018 even after including this. Should I still be happy to see a positive flow that would hopefully keep going up or atleast stay steady barring a big economic downturn? I know people advice to only look at total returns, but didn’t this income stream make my total returns less negative than what it would be otherwise ?
Yes you should feel good about it.

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Darth Xanadu
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Re: Around 43K in dividends last year - feel good about it ?

Post by Darth Xanadu » Fri Jan 11, 2019 2:16 pm

samsoes wrote:
Fri Jan 11, 2019 7:24 am
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Agree completely.

If anyone here feels terrible about a dividend payout, PM me and I'll send you the address for you to mail a check so you can rid yourself of those awful dividend dollars.
Would all of you feel the same if all your mutual funds decided simultaneously and unilaterally to liquidate your entire portfolio and send you a big check? I wouldn't think so...
"A courageous teacher, failure is."

dbr
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Re: Around 43K in dividends last year - feel good about it ?

Post by dbr » Fri Jan 11, 2019 2:46 pm

Darth Xanadu wrote:
Fri Jan 11, 2019 2:16 pm
samsoes wrote:
Fri Jan 11, 2019 7:24 am
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Agree completely.

If anyone here feels terrible about a dividend payout, PM me and I'll send you the address for you to mail a check so you can rid yourself of those awful dividend dollars.
Would all of you feel the same if all your mutual funds decided simultaneously and unilaterally to liquidate your entire portfolio and send you a big check? I wouldn't think so...
Exactly. The last thing you want if you want to be invested in something is to have them constantly trying to hand your investment back to you. Your only choice is to pay the taxes and then try to reinvest.

On the other hand one small windfall I did receive once was that a stock I had went private and the buyout price was considerably higher than the market price I had considered selling at. I made a couple of tens of thousands of dollars I didn't expect, and that was a big deal at the time.

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House Blend
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Re: Around 43K in dividends last year - feel good about it ?

Post by House Blend » Fri Jan 11, 2019 3:02 pm

samsoes wrote:
Fri Jan 11, 2019 7:24 am
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Agree completely.

If anyone here feels terrible about a dividend payout, PM me and I'll send you the address for you to mail a check so you can rid yourself of those awful dividend dollars.
Yes, the livesoft comment is nonsense.

Having $14K in taxable dividends is, by itself, nothing to feel bad (or good) about. Nor is paying tax on taxable dividends.

If there's anything about the topic worth pondering, it would be whether there was a better ex ante arrangement of the pieces of one's asset allocation that would have resulted in better returns after taxes. (Notice that I am referring to asset location here, not the sport of seeing what asset allocation would have been better in hindsight.)

And this is hard to do, since it depends on things like estimating what fraction of tax-deferred will eventually be eaten by taxes and other details of one's financial circumstances.

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TomatoTomahto
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Re: Around 43K in dividends last year - feel good about it ?

Post by TomatoTomahto » Fri Jan 11, 2019 3:09 pm

Stanger wrote:
Fri Jan 11, 2019 9:07 am
Similar situation here, highest tax bracket and large dividends in taxable. What other choice do we have? VTSAX and VTIAX are tax efficient. The only other option I see is Berkshire stock, which doesn't distribute dividends. I am open to all suggestions on a more efficient tax strategy.
Ditto. I sometimes wish we had more BRK, but that sword is two edged. So, we grumble a bit and pay our taxes.
Okay, I get it; I won't be political or controversial. The Earth is flat.

retiringwhen
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Re: Around 43K in dividends last year - feel good about it ?

Post by retiringwhen » Fri Jan 11, 2019 3:14 pm

TomatoTomahto wrote:
Fri Jan 11, 2019 3:09 pm
Stanger wrote:
Fri Jan 11, 2019 9:07 am
Similar situation here, highest tax bracket and large dividends in taxable. What other choice do we have? VTSAX and VTIAX are tax efficient. The only other option I see is Berkshire stock, which doesn't distribute dividends. I am open to all suggestions on a more efficient tax strategy.
Ditto. I sometimes wish we had more BRK, but that sword is two edged. So, we grumble a bit and pay our taxes.
I will say again, if you have equities space in deferred and taxable, split your VTSAX into either 3 or 4 parts using VIGAX/VVIAX for Large-cap and VSMAX for small-cap (or their value/growth components) and allocate the Value portion to IRA/tax-deferred and Growth portion to taxable... over time the funds have similar returns (they take turns winning) and the dividend rate of the value funds are nearly double that of the Growth fund, thus reducing your taxable dividends greatly. they aren't gone, but greatly reduced without buying individual securities.

JustinR
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Re: Around 43K in dividends last year - feel good about it ?

Post by JustinR » Fri Jan 11, 2019 3:16 pm

House Blend wrote:
Fri Jan 11, 2019 3:02 pm
samsoes wrote:
Fri Jan 11, 2019 7:24 am
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Agree completely.

If anyone here feels terrible about a dividend payout, PM me and I'll send you the address for you to mail a check so you can rid yourself of those awful dividend dollars.
Yes, the livesoft comment is nonsense.

Having $14K in taxable dividends is, by itself, nothing to feel bad (or good) about. Nor is paying tax on taxable dividends.
Not following. OP should feel bad about receiving dividends, as should anyone.

Not that it's his fault for receiving dividends, or that he had any choice in the matter. But receiving a dividend is an objectively negative event that makes you poorer.

Which, I'll remind everyone, is what the OP asked about in the first place.

Livesoft's comment is correct and sound.

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TomatoTomahto
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Re: Around 43K in dividends last year - feel good about it ?

Post by TomatoTomahto » Fri Jan 11, 2019 3:19 pm

retiringwhen wrote:
Fri Jan 11, 2019 3:14 pm
TomatoTomahto wrote:
Fri Jan 11, 2019 3:09 pm
Stanger wrote:
Fri Jan 11, 2019 9:07 am
Similar situation here, highest tax bracket and large dividends in taxable. What other choice do we have? VTSAX and VTIAX are tax efficient. The only other option I see is Berkshire stock, which doesn't distribute dividends. I am open to all suggestions on a more efficient tax strategy.
Ditto. I sometimes wish we had more BRK, but that sword is two edged. So, we grumble a bit and pay our taxes.
I will say again, if you have equities space in deferred and taxable, split your VTSAX into either 3 or 4 parts using VIGAX/VVIAX for Large-cap and VSMAX for small-cap (or their value/growth components) and allocate the Value portion to IRA/tax-deferred and Growth portion to taxable... over time the funds have similar returns (they take turns winning) and the dividend rate of the value funds are nearly double that of the Growth fund, thus reducing your taxable dividends greatly. they aren't gone, but greatly reduced without buying individual securities.
I have no equities space in tax deferred, only (obviously) taxable.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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House Blend
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Re: Around 43K in dividends last year - feel good about it ?

Post by House Blend » Fri Jan 11, 2019 3:24 pm

JustinR wrote:
Fri Jan 11, 2019 3:16 pm
House Blend wrote:
Fri Jan 11, 2019 3:02 pm
Yes, the livesoft comment is nonsense.

Having $14K in taxable dividends is, by itself, nothing to feel bad (or good) about. Nor is paying tax on taxable dividends.
Not following. OP should feel bad about receiving dividends, as should anyone.

Not that it's his fault for receiving dividends, or that he had any choice in the matter. But receiving a dividend is an objectively negative event that makes you poorer.

Which, I'll remind everyone, is what the OP asked about in the first place.

Livesoft's comment is correct and sound.
The only part of your comment that makes sense to me is that you don't understand mine.

The fact that paying taxes is a cost is not something one should "feel terrible" about.

If I offer you a choice between two financial black boxes and tell you only how much tax each will cost you, you don't have enough information to know which one is preferable.

jcar
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Re: Around 43K in dividends last year - feel good about it ?

Post by jcar » Fri Jan 11, 2019 3:30 pm

Dividends benefit me as a simple way to generate cash flow when I plan a trip on relatively short notice. Then I use the income generated to pay for the trip and incidental expenses. I just direct the dividends for a month or so to not reinvest but drop into my cash account. Otherwise I let the dividend reinvest as monthly expenses pretty much covered by pensions and SS.

BoggledHead2
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Re: Around 43K in dividends last year - feel good about it ?

Post by BoggledHead2 » Fri Jan 11, 2019 3:51 pm

FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Thank you. Sometimes I read this forum and question whether people even exist in the same reality as me.

If receiving 14,000 in taxable dividends is “terrible”, life is good. Really good.

LSLover
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Re: Around 43K in dividends last year - feel good about it ?

Post by LSLover » Fri Jan 11, 2019 4:03 pm

Saying that $14K in dividends is terrible is equivocal. If you get that much in dividends on a $1M portfolio, it maybe tax inefficient. However, if you get these dividends on a $10M portfolio that would be suggestive of a very well planned after tax portfolio.

So, as always, it depends...

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TomatoTomahto
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Re: Around 43K in dividends last year - feel good about it ?

Post by TomatoTomahto » Fri Jan 11, 2019 4:07 pm

BoggledHead2 wrote:
Fri Jan 11, 2019 3:51 pm
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
Thank you. Sometimes I read this forum and question whether people even exist in the same reality as me.

If receiving 14,000 in taxable dividends is “terrible”, life is good. Really good.
Every person has their own reality, but my not sharing your reality doesn’t make mine inconsequential.

$14k of taxable dividends, or $140k of taxable dividends, isn’t “really good.” Having a large taxable account is good, and the dividends are perhaps a side effect of that, but it doesn’t make the dividends good.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Tycoon
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Re: Around 43K in dividends last year - feel good about it ?

Post by Tycoon » Fri Jan 11, 2019 4:36 pm

FinancialRookie wrote:
Fri Jan 11, 2019 1:52 pm
Tycoon wrote:
Fri Jan 11, 2019 8:21 am
livesoft wrote:
Fri Jan 11, 2019 8:15 am
I'd rather have $14,000 in untaxed gains than $14,000 in taxed dividends. Some taxpayers realize that those dividends can create even more taxes on Social Security, increase Medicare premiums, reduce tax credits, and push one over a tax cliff.
I agree with this. Needlessly paying taxes is just plain dumb.
Sure. But if the OP is investing in his tax free and pre tax accounts and then the extra in taxable is that worse than not investing that extra because you potentially pay taxes on dividends? Agreed, if that's the case.
That would be dumb as well. He has managed to save a substantial amount of assets and we would all love to pay 0 taxes on our money. To the average American having to deal with this "problem" would be quite a blessing. Agreed
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FinancialRookie
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Re: Around 43K in dividends last year - feel good about it ?

Post by FinancialRookie » Fri Jan 11, 2019 4:47 pm

Tycoon wrote:
Fri Jan 11, 2019 4:36 pm
FinancialRookie wrote:
Fri Jan 11, 2019 1:52 pm
Tycoon wrote:
Fri Jan 11, 2019 8:21 am
livesoft wrote:
Fri Jan 11, 2019 8:15 am
I'd rather have $14,000 in untaxed gains than $14,000 in taxed dividends. Some taxpayers realize that those dividends can create even more taxes on Social Security, increase Medicare premiums, reduce tax credits, and push one over a tax cliff.
I agree with this. Needlessly paying taxes is just plain dumb.
Sure. But if the OP is investing in his tax free and pre tax accounts and then the extra in taxable is that worse than not investing that extra because you potentially pay taxes on dividends? Agreed, if that's the case.
That would be dumb as well. He has managed to save a substantial amount of assets and we would all love to pay 0 taxes on our money. To the average American having to deal with this "problem" would be quite a blessing. Agreed
:sharebeer :sharebeer

JustinR
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Re: Around 43K in dividends last year - feel good about it ?

Post by JustinR » Fri Jan 11, 2019 4:53 pm

Darth Xanadu wrote:
Fri Jan 11, 2019 2:16 pm
Would all of you feel the same if all your mutual funds decided simultaneously and unilaterally to liquidate your entire portfolio and send you a big check? I wouldn't think so...
Exactly. Imagine if Vanguard issued him a $2m dividend.

The people in this thread congratulating him or denying that receiving a dividend is terrible simply don't understand what dividends are.

"Wow!! Congratulations on the $2m of income. Life is great!! Receiving a $2m dividend is quite a blessing!!"

Snowjob
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Re: Around 43K in dividends last year - feel good about it ?

Post by Snowjob » Fri Jan 11, 2019 4:57 pm

t885 wrote:
Fri Jan 11, 2019 6:50 am
chevca wrote:
Thu Jan 10, 2019 11:59 pm
FinancialRookie wrote:
Thu Jan 10, 2019 11:04 pm
livesoft wrote:
Thu Jan 10, 2019 7:34 pm
You should feel terrible about the $14K in taxable dividends.
Terrible? Seriously? Sometimes I think some people on this forum live in an alternate universe.

You should feel proud. That is an excellent accomplishment. Your total dividends is more than my annual salary. Keep up the good work.
I agree!

Is it optimal tax wise or whatever? Maybe not, probably not, i don't really know. But, the OP made almost as much as the median income for the US in dividends. At least last I knew it was around $50k.

Yes, they should really feel terrible about that.... :oops: :confused

Get a grip, some of you.
I came here to post this.
On top of the above, the OP stated his income is derived from investments. Given that, and the size of the portfolio required to generate such dividends, he is probably just going to spend that money anyway if not more. Hell if that 43k represented the cash from a 2% yield on the total stock market all these negative respondents would be hard pressed to find the OP an rational alternative.

livesoft
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Re: Around 43K in dividends last year - feel good about it ?

Post by livesoft » Fri Jan 11, 2019 4:59 pm

Snowjob wrote:
Fri Jan 11, 2019 4:57 pm
On top of the above, the OP stated his income is derived from investments.
I read it that some of his income is from dividends, but we all knew that already. The OP declined to state if there was earned income, rental income, etc. involved. I don't think we know.

Specifically, the exchange went like this:
skor99 wrote:
Fri Jan 11, 2019 11:58 am
The Wizard wrote:
Fri Jan 11, 2019 9:57 am
livesoft wrote:
Fri Jan 11, 2019 8:29 am
[...]
Would be good if we knew more about the OP's taxable account and thus, where the dividends came from...
Mostly dividends from mutual funds and ETFs such as the Van total stock market, VYM, VTI, SPY etc
So the dividends from the taxable account are described as coming mostly from mutual funds and ETFs which is really normal and they are likley to be mostly qualified, but there is really no discussion of the entire spectrum of income that the OP has.
Last edited by livesoft on Fri Jan 11, 2019 5:04 pm, edited 1 time in total.
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Cash is King
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Re: Around 43K in dividends last year - feel good about it ?

Post by Cash is King » Fri Jan 11, 2019 5:03 pm

JustinR wrote:
Fri Jan 11, 2019 4:53 pm
Darth Xanadu wrote:
Fri Jan 11, 2019 2:16 pm
Would all of you feel the same if all your mutual funds decided simultaneously and unilaterally to liquidate your entire portfolio and send you a big check? I wouldn't think so...
Exactly. Imagine if Vanguard issued him a $2m dividend.

The people in this thread congratulating him or denying that receiving a dividend is terrible simply don't understand what dividends are.

"Wow!! Congratulations on the $2m of income. Life is great!! Receiving a $2m dividend is quite a blessing!!"
Wow is right!!!! It's mind boggling that you continue to push your narrative that dividends are terrible and we don't understand what dividends are. :oops: :annoyed

livesoft
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Re: Around 43K in dividends last year - feel good about it ?

Post by livesoft » Fri Jan 11, 2019 5:05 pm

For the record, I did not state that dividends are terrible. But I love this thread anyways. :)
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Snowjob
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Re: Around 43K in dividends last year - feel good about it ?

Post by Snowjob » Fri Jan 11, 2019 5:17 pm

Cash is King wrote:
Fri Jan 11, 2019 5:03 pm
JustinR wrote:
Fri Jan 11, 2019 4:53 pm
Darth Xanadu wrote:
Fri Jan 11, 2019 2:16 pm
Would all of you feel the same if all your mutual funds decided simultaneously and unilaterally to liquidate your entire portfolio and send you a big check? I wouldn't think so...
Exactly. Imagine if Vanguard issued him a $2m dividend.

The people in this thread congratulating him or denying that receiving a dividend is terrible simply don't understand what dividends are.

"Wow!! Congratulations on the $2m of income. Life is great!! Receiving a $2m dividend is quite a blessing!!"
Wow is right!!!! It's mind boggling that you continue to push your narrative that dividends are terrible and we don't understand what dividends are. :oops: :annoyed
Well actually the dividend wouldn't change though there would be more capital gains and enormous "return of capital" payment

gmc4h232
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Re: Around 43K in dividends last year - feel good about it ?

Post by gmc4h232 » Fri Jan 11, 2019 5:20 pm

Just ate a double quarter pounder from the MCD. I feel terrible.....

But not as terrible as when I have to pay taxes on dividends that could have otherwise been avoided

Snowjob
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Re: Around 43K in dividends last year - feel good about it ?

Post by Snowjob » Fri Jan 11, 2019 5:22 pm

livesoft wrote:
Fri Jan 11, 2019 4:59 pm
Snowjob wrote:
Fri Jan 11, 2019 4:57 pm
On top of the above, the OP stated his income is derived from investments.
I read it that some of his income is from dividends, but we all knew that already. The OP declined to state if there was earned income, rental income, etc. involved. I don't think we know.

Specifically, the exchange went like this:
skor99 wrote:
Fri Jan 11, 2019 11:58 am
The Wizard wrote:
Fri Jan 11, 2019 9:57 am
livesoft wrote:
Fri Jan 11, 2019 8:29 am
[...]
Would be good if we knew more about the OP's taxable account and thus, where the dividends came from...
Mostly dividends from mutual funds and ETFs such as the Van total stock market, VYM, VTI, SPY etc
So the dividends from the taxable account are described as coming mostly from mutual funds and ETFs which is really normal and they are likley to be mostly qualified, but there is really no discussion of the entire spectrum of income that the OP has.
True -- But even so, unless there as far larger tax advantaged account to provide flexibility hes going to have limited options to reduce this. On top of the tax drag of the capital gains he would pay in order to get out of his current positions and re-organize in the first place (if we assume hes been a beneficiary of the run-up the last 8 years)

Cash is King
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Re: Around 43K in dividends last year - feel good about it ?

Post by Cash is King » Fri Jan 11, 2019 5:24 pm

livesoft wrote:
Fri Jan 11, 2019 5:05 pm
For the record, I did not state that dividends are terrible. But I love this thread anyways. :)
Ditto. This really boils down to what your investment strategy is. Some people including myself just the accept the 15% tax rate as the cost of doing business. I live in a state with no state income taxes which impacts my decision. I probably would not hold quality dividend stocks in a taxable account if I lived in California and was a high earner.

When this topic comes up, I'm reminded by a great quote from Charles Munger: "Drowning in income is fun"

:sharebeer

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skor99
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Re: Around 43K in dividends last year - feel good about it ?

Post by skor99 » Fri Jan 11, 2019 5:39 pm

To clarify to all the folks responding, the portfolio size (regular plus retirement ) that generated these dividends is slightly less than $2MM. And my original question was directed towards those people who always say any kind of dividends are bad. That’s why I asked if I should feel good about it. Obviously, I like having this stream of passive income that should remain steadily growing barring something really bad happening, but all the comments on Bogleheads about investing in dividend stocks or ETFs not being a very smart strategy prompted this thread.
Also, nobody has yet answered my question of non or low dividend ETFs or MFs. Has the return of such investments proved to be superior in the medium or long term to say a VIG or VYM ?

MathWizard
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Re: Around 43K in dividends last year - feel good about it ?

Post by MathWizard » Fri Jan 11, 2019 5:55 pm

Yes, the $43K lessens the impact of the $90K in stock prices.

My diversified portfolio only throws off about 2% in dividends.
If you have a a similarly diversified portfolio, that would mean more than $2Million in equities alone,
so you have done well. Feel good about that.

The Wizard
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Re: Around 43K in dividends last year - feel good about it ?

Post by The Wizard » Fri Jan 11, 2019 5:58 pm

Sometimes people miss the point on income and taxes.
Let's try a fill in the blank quiz:

"As a retiree filing single, I would LOVE to be paying $100,000+ in required Federal income taxes each year in retirement because this would mean that __________________________."
Attempted new signature...

Leesbro63
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leesbro63 » Fri Jan 11, 2019 6:04 pm

The original poster never did clear up why most of the dividends are not taxed. Is it because he's in a low tax bracket and has no other income? Are those actually "interest dividends" of muni bond funds? Does this mean his portfolio is actually bond heavy, not stock heavy as many have assumed? This is a question that the OP might want to answer for us.

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Re: Around 43K in dividends last year - feel good about it ?

Post by barnaclebob » Fri Jan 11, 2019 6:06 pm

Why are so many people acting like dividends are optional? I like seeming my dividend amount go up because it means I have more money. My portfolio is set the way I like it and dividends are a fact of life with that portfolio.
The Wizard wrote:
Fri Jan 11, 2019 5:58 pm
Sometimes people miss the point on income and taxes.
Let's try a fill in the blank quiz:

"As a retiree filing single, I would LOVE to be paying $100,000+ in required Federal income taxes each year in retirement because this would mean that ____I'm rich *****!____" (line from the Dave Chapelle Show)
AMEN!
Last edited by barnaclebob on Fri Jan 11, 2019 6:13 pm, edited 6 times in total.

livesoft
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Re: Around 43K in dividends last year - feel good about it ?

Post by livesoft » Fri Jan 11, 2019 6:07 pm

skor99 wrote:
Fri Jan 11, 2019 5:39 pm
Also, nobody has yet answered my question of non or low dividend ETFs or MFs. Has the return of such investments proved to be superior in the medium or long term to say a VIG or VYM ?
You can look this up at Morningstar.com for yourself, but to get you going:

Image

Note the above does not account for any taxes along the way. So it looks like Total US Stock Market for the win before taxes, so after-tax that probably still holds true.
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JustinR
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Re: Around 43K in dividends last year - feel good about it ?

Post by JustinR » Fri Jan 11, 2019 6:07 pm

skor99 wrote:
Fri Jan 11, 2019 5:39 pm
To clarify to all the folks responding, the portfolio size (regular plus retirement ) that generated these dividends is slightly less than $2MM. And my original question was directed towards those people who always say any kind of dividends are bad. That’s why I asked if I should feel good about it. Obviously, I like having this stream of passive income that should remain steadily growing barring something really bad happening, but all the comments on Bogleheads about investing in dividend stocks or ETFs not being a very smart strategy prompted this thread.
Also, nobody has yet answered my question of non or low dividend ETFs or MFs. Has the return of such investments proved to be superior in the medium or long term to say a VIG or VYM ?
A few points that all investors should drill into their head:

- You do not profit or gain wealth from dividends at all.

- Dividends are only "passive income" in the sense that it's like if someone else had sold your shares (without your input or control) and the money is now in your bank account. And charged you a fee for it (tax).

- Receiving a dividend is like selling the shares off yourself, except you pay more in taxes. If you sold the shares yourself, you would pay less in taxes and keep more of the money.

- Therefore, if there were 2 equivalent funds, one that didn't distribute dividends and one that did, you would have more money at the end of the day with the non-dividend fund. (in taxable accounts. In retirement accounts they'd be equal.)

- This is why it's often recommended by Bogleheads not to "buy the dividend"... That is, wait until after an upcoming distribution to buy.
Last edited by JustinR on Sat Jan 12, 2019 10:35 pm, edited 7 times in total.

livesoft
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Re: Around 43K in dividends last year - feel good about it ?

Post by livesoft » Fri Jan 11, 2019 6:28 pm

JustinR wrote:
Fri Jan 11, 2019 6:07 pm
- Therefore, if there were 2 equivalent funds, one that didn't distribute dividends and one that did, you would have more money at the end of the day with the non-dividend fund.
Unless all this happened in a tax-advantaged account, right?
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JustinR
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Re: Around 43K in dividends last year - feel good about it ?

Post by JustinR » Fri Jan 11, 2019 6:36 pm

livesoft wrote:
Fri Jan 11, 2019 6:28 pm
JustinR wrote:
Fri Jan 11, 2019 6:07 pm
- Therefore, if there were 2 equivalent funds, one that didn't distribute dividends and one that did, you would have more money at the end of the day with the non-dividend fund.
Unless all this happened in a tax-advantaged account, right?
Yep. Judging by how this thread is going I should probably make that clear :D
Last edited by JustinR on Fri Jan 11, 2019 6:37 pm, edited 1 time in total.

Leesbro63
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Re: Around 43K in dividends last year - feel good about it ?

Post by Leesbro63 » Fri Jan 11, 2019 6:37 pm

This has evolved into the old Boglehead discussion about the value of dividends. And as is always pointed out in those many threads, in theory no dividends are better than any dividends (because taxes become under the control of the owner...he can sell shares or not). But in the real world, many like the automatic income of dividends, even if, in theory, they are better off without them. Dividends don't cause regret as in: "I sold shares to live on at the beginning of the year and now they've soared" or "My shares crashed and now I have to sell some to use as income since I don't have dividends". For those in accumulation, dividends are probably not preferred. But for those in retirement, dividends help with cash flow without having to use too much brain power.

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Re: Around 43K in dividends last year - feel good about it ?

Post by ad2007 » Fri Jan 11, 2019 6:56 pm

I bet those folks who do not detest dividend income aren't paying a painful amount in taxes (think highest tax brackets well into the six figures).

Brk.b is an option but not diversified enough for me. A basket full of stocks that pay no to low div is a handful to manage and not diversified enough for me. At the end of the day, dividend from index funds is not avoidable.

So.. OP, all you can really do is make sure your index funds are as tax efficient as possible. You've not disclosed that, so the smart folks here can't help you yet.

I'd rather my portfolio not generate div but I can't control that. Paying taxes on div is not fun.

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Re: Around 43K in dividends last year - feel good about it ?

Post by retiringwhen » Fri Jan 11, 2019 7:02 pm

livesoft wrote:
Fri Jan 11, 2019 6:07 pm
skor99 wrote:
Fri Jan 11, 2019 5:39 pm
Also, nobody has yet answered my question of non or low dividend ETFs or MFs. Has the return of such investments proved to be superior in the medium or long term to say a VIG or VYM ?
You can look this up at Morningstar.com for yourself, but to get you going:

Image

Note the above does not account for any taxes along the way. So it looks like Total US Stock Market for the win before taxes, so after-tax that probably still holds true.
From Vanguard, 10 year return after taxes on distributions.

VTSAX = 12.80%
VIG = 11.20%
VYM = 11.52%

Returns after taxes on distribution and sale of shares.

VTSAX = 11.99%
VIG = 9.68%
VYM = 10.12%

Reading the Vanguard prospectus pages is very interesting, here is one for VIG https://investor.vanguard.com/etf/profi ... rmance/vig

I find that both dividend funds are shown to underperform blended funds for the last 10 years.....

Calculations use the Vanguard model documented here: https://investor.vanguard.com/investing ... ax-returns

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Re: Around 43K in dividends last year - feel good about it ?

Post by triceratop » Fri Jan 11, 2019 7:59 pm

barnaclebob wrote:
Fri Jan 11, 2019 6:06 pm
Why are so many people acting like dividends are optional? I like seeming my dividend amount go up because it means I have more money. My portfolio is set the way I like it and dividends are a fact of life with that portfolio.
The extent to which you receive dividends on a diversified portfolio of a given size is optional. Thus, you should be proud(I guess, I feel pretty 'meh' about my portfolio no matter its size -- it's just there, it's a thing) of the size of your diversified investment portfolio and not the amount of dividends it throws off. There are diversified ETFs which are more tax efficient than TSM, e.g. IJR (or even IJS if you want value exposure which is responsible for much of the good performance of dividend-focused) funds.

I understand that some people might be uncomfortable with strong statements about how dividends are to be avoided to the extent possible from e.g. livesoft but when the question is literally "is this a good thing?" the mathematically correct answer is "no". One should expect to receive an answer to one's question.

P.S. Thanks livesoft for the rec, this thread is exciting.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Around 43K in dividends last year - feel good about it ?

Post by Random Poster » Fri Jan 11, 2019 8:09 pm

JustinR wrote:
Fri Jan 11, 2019 6:07 pm

A few points that all investors should drill into their head:



- Dividends are only "passive income" in the sense that they are your shares being sold off without your input or control. And remember that income in this situation doesn't mean "gain wealth"... it's more like a simple cash transfer from your brokerage account to your bank account (with a tax transfer fee).

I’m pretty sure that when I receive dividends from my Total Stock Market fund, none of my shares are being sold off.

The shares may be worth less the day after the dividend than they were the day before the dividend, but I still have the exact same number of shares after the dividend is paid that I had the day before the dividend is paid.

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triceratop
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Re: Around 43K in dividends last year - feel good about it ?

Post by triceratop » Fri Jan 11, 2019 8:11 pm

Random Poster wrote:
Fri Jan 11, 2019 8:09 pm
JustinR wrote:
Fri Jan 11, 2019 6:07 pm

A few points that all investors should drill into their head:



- Dividends are only "passive income" in the sense that they are your shares being sold off without your input or control. And remember that income in this situation doesn't mean "gain wealth"... it's more like a simple cash transfer from your brokerage account to your bank account (with a tax transfer fee).

I’m pretty sure that when I receive dividends from my Total Stock Market fund, none of my shares are being sold off.

The shares may be worth less the day after the dividend than they were the day before the dividend, but I still have the exact same number of shares after the dividend is paid that I had the day before the dividend is paid.
You own fewer shares of each of the individual companies in TSM. I don't know why anyone cares about how many shares of TSM specifically that they own; it's not like there is any real value to one's proxy vote on fund governance.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Around 43K in dividends last year - feel good about it ?

Post by JustinR » Fri Jan 11, 2019 8:18 pm

Random Poster wrote:
Fri Jan 11, 2019 8:09 pm
JustinR wrote:
Fri Jan 11, 2019 6:07 pm

A few points that all investors should drill into their head:



- Dividends are only "passive income" in the sense that they are your shares being sold off without your input or control. And remember that income in this situation doesn't mean "gain wealth"... it's more like a simple cash transfer from your brokerage account to your bank account (with a tax transfer fee).

I’m pretty sure that when I receive dividends from my Total Stock Market fund, none of my shares are being sold off.

The shares may be worth less the day after the dividend than they were the day before the dividend, but I still have the exact same number of shares after the dividend is paid that I had the day before the dividend is paid.
The number of shares you own literally doesn't mean anything (from the perspective of a typical investor). Only the total value matters.

1 share of $100 and 100 shares of $1 is the same thing.

Anyways, I was making an analogy. Result is the same.

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