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Investing in high yield dividend stocks
Posted on 1/15/12 at 8:56 am
Posted on 1/15/12 at 8:56 am
I want to supplement my retirement income by starting to invest in stocks that pay decent dividends, and then obviously reinvesting those dividends over time. Couple questions I had:
Better to open an IRA for this, or just a normal brokerage account? If IRA I suspect it will have to be a traditional since I'll soon be over the Roth income limit, so I don't see a point in starting a Roth now.
As dividends are paid, and assuming I open an iRA for this, when I reinvest those amount, is that part of the $5k contribution limit?
Other than choosing which stocks, anything key I should know about this strategy? TIA
Better to open an IRA for this, or just a normal brokerage account? If IRA I suspect it will have to be a traditional since I'll soon be over the Roth income limit, so I don't see a point in starting a Roth now.
As dividends are paid, and assuming I open an iRA for this, when I reinvest those amount, is that part of the $5k contribution limit?
Other than choosing which stocks, anything key I should know about this strategy? TIA
3
Posted on 1/15/12 at 10:33 am to Htown Tiger
Open the Roth and Pile into it while you can.
It is best to have a mix of Roth and traditional.
I think your high yield strategy rationale is arbitrary and misinformed, but that's up to you to decide.
IRA > than brokerage almost in all circumstances.
Dividends do not count.
Picking stocks is not something you should be doing. Get in an index fund or mutual fund.
It is best to have a mix of Roth and traditional.
I think your high yield strategy rationale is arbitrary and misinformed, but that's up to you to decide.
IRA > than brokerage almost in all circumstances.
Dividends do not count.
Picking stocks is not something you should be doing. Get in an index fund or mutual fund.
Posted on 1/15/12 at 10:49 am to Htown Tiger
If you have the dividend stocks in your IRA, whenever you withdraw the money, you will pay income taxes on it based on your marginal tax rate which could easily be a 25% marginal rate ($69,000 – $139,350 AGI, married filing jointly).
If you earn the dividends outside of a tax deferred account, such as an IRA, current maximum tax rates on dividends are only 15%.
If you earn the dividends outside of a tax deferred account, such as an IRA, current maximum tax rates on dividends are only 15%.
Posted on 1/15/12 at 11:55 am to Htown Tiger
Check out the ETF VYM. It is near 3 years highs. You might want to wait until there is a pullback to invest. Us boomers are scrambling for income and the dividend paying stocks have been a favorite.
Posted on 1/15/12 at 12:20 pm to LSURussian
quote:
Picking stocks is not something you should be doing. Get in an index fund or mutual fund.
But where's the fun in that? jk
quote:
If you have the dividend stocks in your IRA, whenever you withdraw the money, you will pay income taxes on it based on your marginal tax rate which could easily be a 25% marginal rate.
If you earn the dividends outside of a tax deferred account, such as an IRA, current maximum tax rates on dividends are only 15%.
Great point.
Posted on 1/15/12 at 3:44 pm to Cold Pizza
quote:
quote: If you have the dividend stocks in your IRA, whenever you withdraw the money, you will pay income taxes on it based on your marginal tax rate which could easily be a 25% marginal rate. If you earn the dividends outside of a tax deferred account, such as an IRA, current maximum tax rates on dividends are only 15%.
Great point.
Tax rates on QDI and Cap gains can change. Don't underestimate the benefits of taxable brokerage accounts. If you put effort into it you can manage ST and LT losses to benefit you when later used to offset large gains or to reduce current taxable income. In 2010 and 2011 I used a significant amount of loss carry forwards to greatly reduce taxes on equity trades and sale of investment RE. You can't do that in a Roth/Tira/401k, etc. Having a taxable account of significant value can greatly help you reduce income taxes if you early retire and can help bridge time to pensions, SS, 401k distribution, etc. I would not want to have to 72t a 401k to do that.
Posted on 1/24/12 at 7:52 am to Cold Pizza
I am semi -retired and 60 yrs. old. I have been using this strategy for 2 years and have done well. Research stocks: there are several quality stocks that pay a nice dividend. A few you may want to look at: AT&T, Verizon, American Capital, Chevron, Eli Lilly, Johnson & Johnson, Abbot Labs, Bristol Myers, Altira, Spectra Energy, Coca Cola and McDonald's. Good luck!
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