What Type of Account Do You Use?

[Dan Mac @DGSInvesting]

Just curious what type of investment account you all use for your dividend growth investing? Taxable account, IRA (Roth or Traditional), any other type? And why did you choose that type of account?

Personally, I'm using a taxable account with an online discount brokerage (Scottrade). I chose to use that account because I wanted access to the money if I needed it for some reason. However, lately I've been considering starting to contribute to either a Roth or Traditional IRA for the tax advantages.

[ChadR]

ROTH IRA. I do (currently) all my investing in it. It has the best of both worlds. I don't have to worry about any tax consequences and if I need the money early, I can pull out all my withdrawals tax and penalty free. The only downside is that I can only put $11k into it this year (mine and my wife's contribution). All our extra money is going to pay off the mortgage and a land note that we have. Once those 2 are paid off, we'll invest in taxable accounts.

[cannew]

Being a Canadian our accounts are different. We have:

With ShareOwners Investment Inc. a discount broker. Their main advantage is that they automatically re-invest all dividends, regardless the amount and purchase shares to 4 decimals.

1. A RRIF account (registered retirement income account. All activities are tax free, but I am required to withdraw a % each year and claim it as taxable income. The % increases each till it reaches 20%).

2. A TFSA (tax free savings account where all interest, dividends and capital gains are tax free). Max contribution $5,500 per account each yr.

3. A taxable account.

4. We also have DRIP accounts where the company stocks allow Optional Share Purchase at no cost.

[Kerim]

I agree that the tax-deferred accounts are the best, but my dividend growth stocks are spread across several accounts, one taxable and a couple of IRAs. I wish that they were consolidated -- it would make things easier, but it evolved the way it evolved, so here I am. To look on the bright side, I guess I have the best of both worlds -- tax savings and accounting simplicity in the IRAs and easy access to my funds if I need them in the taxable account.

[hendi_alex]

It is hard for me to tell whether a Roth is better than a traditional IRA or not. While the Roth has taxes paid up front, it has none of the benefits of compounding earnings on the government's money. Lots of people love the Roths and I am sure they are a simpler alternative in retirement and perhaps for estate purposes, but for the life of me, any differences in the two seem to represent a wash.

As to the question of regular versus tax advantaged, that is a no brainer to me. What ever tax advantaged election, the fund will grow much faster as opposed to non tax advantaged. Of course some source of 6 months to a year of emergency cash should always be taken care of before additional savings get locked away, out of reach.

[fiveoh]

I use both a traditional IRA and a taxable account(after/if I max tax-deferred accounts) for my DGI stocks. I also have a 401k but it doesn't allow individual stocks so it's all in an index fund. My plan is to convert the 401k to div stocks upon retirement.

I use a traditional over the Roth since I plan to have less income when I retire. Also "a bird in the hand is worth two in the bush". You never know how the tax laws will change in the future, I feel more comfortable taking my savings now.

[mjs_28s]

Taxable account. When I work again it will be Roth IRAs and taxable accounts getting the earned income dollars.

[Dividend Watcher]

Traditional IRAs for both my wife and I. We're both self-employed and the tax reduction helps especially since we pay both employer and employee portions of Social Security and Medicare taxes.

I'm thinking of transferring a little at a time into a Roth just because of the no RMD requirement when the extra cash for the taxes are available. According to my calculations, dividend income will not cover the RMD and I don't want to have to sell my capital just to make the RMD. Recharacterization can be done with in-kind transfers but it's going to be more of a hassle picking in choosing at the time. Plus, everything that comes of out the Roth will be tax free.

[Dexter]

I try to stick anything that pays a qualified dividend in a taxable account, so this includes stocks and index funds.

Everything that pays a tax free dividend obviously goes into a taxable account as well.

Everything else I try to put into retirement accounts.

[CritMass]

Oops, I may have just posted a partial, accidentally. Being 61, I moved my 403-b funds into a Vanguard trad IRA after I was 59 and half. Every six months after that I move balance of that 403-b into the IRA. My 403-b is with a lousy, high cost, high fee insurance co ( I work for a Fla public school district) and I still use them for tax-deferred payroll deductions until I retire in July. I also have a taxable account with Schwab, plus a Roth with Schwab. Both Vg and Schwab are great to work with, on-line and over phone. When I set up the Vg account, I had two 403b s and a 457. Vg phone agent that I cold-called in setting up the IRA, once realizing the total I wanted to move to Vg, connected me with my own
"concierge", who kept me on the phone as she spoke with all three other funds to set up the transfers. Three weeks later I had the Vg IRA set up with all the funds in place. They helped me again in similar fashion two weeks ago. So by the time I retire in July, all of my assets will be in two companies, one a traditional IRA, and the other a taxable plus my Roth. Sorry for the plug for both companies, but they make doing business very easy, and very inexpensive. -Chris