No. of Recommendations: 2

Here is where I see the big catch-22 of dividend reinvestment investing. It is best applied in a tax-advantaged account, that is to build wealth slowly, dividend reinvestment is a very solid strategy.


When it comes time to begin living off the investments, preferably just the dividends, IRAs are lousy places to hold the investments. This is because IRA withdrawals will be taxed as income, likely (hopefully) at tax rates above the qualified dividend tax rate. Gotcha!

Of course this is true of long term capital gains tax rates as well.

ROTHs are free of the problems, but investment is limited by amount and income level.

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