Recently read an article where the advisor made a big issue about the tax advantage of dividend stocks outside a registered account. He made a point of saying that dividends in a registered account don't get the tax advantage and when the money is taken out it's taxed at the highest rate, same as interest. He further added that in the registered account you should have your fixed income and low interest or low yield dividend stocks and keep the high yield dividend stocks in your non-registered account.
I hold only DG stocks in all my accounts, registered or not.
Any thoughts or opinions?
Posts: 2,411
Threads: 54
Joined: Jul 2013
Reputation:
34
Forgive my ignorance, I've never heard the term.
What is the difference between registered and non-registered accounts?
Maybe this is just a canadian issue, registered is our Registered Retirement Saving Plans, possibly similar to your 401k, where we get a tax deduction when money is placed in the account. Later when the funds are taken out they are taxed as regular income.
Non-registered accounts are after tax dollars invested.
Posts: 583
Threads: 62
Joined: Sep 2013
Reputation:
16
IMO high yield investments like REITs and BDCs that pay non qualified dividends or interest paying bonds are best held inside the IRA. Tax advantaged investments are best held in regular (non tax deferred) accounts. If a person only invests in DG stocks the point is irrelevant. And while the DG stocks get hit with a higher tax when funds are taken out of the tax deferred account, it is also true that the funds still have the advantage of much greater compounding while held in the account. So the higher tax at the end could mostly be a wash as compared to similar investments held in a regular account.
Alex
In Canada, depending upon the Prov, if one has only dividend income of $40,000 to $50,000 than it is tax free, though most people will have other income. However, the dividend income can reduce the other income if it is not too high.
