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Financial Planning / Tax Strategies


Subject:  Re: New account - strategy for taxes? Date:  4/17/2013  10:39 AM
Author:  aj485 Number:  118460 of 132661

I am wanting to collect growing dividends to use as income for myself when needed, reinvest the collected income if I don't need it.
Those who are already investing to collect a monthly or quarterly income, how do you handle the dividends?

It really depends on what you think your potential income needs from the dividends is going to be.

I have an account that I am using to generate income for a specific payment, so I don't reinvest those dividends - they go straight to a checking account at the broker where I hold the investments, and the payment is made from that account.

If I was not sure that I was going to need the income and wanted to reinvest at least some, I would probably determine what I thought my maximum potential income need from the dividends would be, collect that amount of dividends in the checking account, and then start reinvesting. I would look to re-load the checking account on a regular basis by stopping the reinvestment if I was using the money, otherwise I would just keep reinvesting.

Another way to split between cash and reinvestment would be to collect dividends from specific investments in the checking account and reinvest dividends from the rest of the investments, adjusting if the checking account was getting too big or too small, or as dividend payments changed.

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