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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: port for retirement and in retirement Date: 2/9/2012 8:48 PM
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I'm getting more and more interested in dividend growth investing, especially as I approach retirement (in about 5 1/2 years). I remember, years ago, being concerned about holding dividend payers in an IRA, the dividend money that I would receive in retirement would be taxed at ordinary income rates (instead of the much lower rates that apply to qualified dividends). But I was won over by the argument that receiving the dividends in the IRA and then reinvesting them would actually result in a greater return over the long run, and this would outweigh the tax differential I mentioned.

But this can't be true IN retirement. If I'm already IN retirement, and not investing FOR retirement, then it seems to me that I should hold the dividend-paying stocks in a taxable account rather than in an IRA, so that the dividends would come to me at the lower tax rate.

In fact, as I thought more about taxes, it then seemed to me that a Roth account would be best of all, since there would be no tax at all on the dividends.

So as I approach retirement, the top choices for the placement of my dividend-paying stocks seem to be (a) in a taxable account, (b) in a Roth account.

Right now, with some earned income, I could invest in either (a) or (b) -- or both.

Besides dividend-paying stocks, I'm also interested in index funds. As before, it seems that a Roth account is the best place for them. But how does a taxable account compare with a traditional IRA (or a SEP or a 401K -- all of which I think of as the same, taxwise)?

Finally, what are your guiding thoughts about using ETFs instead of index funds?

culcha
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