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M*: 5 Pitfalls To Avoid During Mutual Fund Capital Gain Distribution Season
Awhile back we decided to use index funds and ETFs in our taxable accounts to minimize year end distribution. Sometime active managed funds paid out sizable distribution even in bad years.
Sven....what's been your overall assessment of this shift in your taxable portfolio?
I ask because I'm thinking about a similar approach. In my first year of retirement, I'm considering the distributions as the next year's paycheck from this account, but that may not be the most prudent way to consider the transaction.
Overall the change has been good and very predictable. The capital gain has reduced significantly and the dividend distribution is manageable, ~2% for S&P 500 index funds, for example. We have a national-based muni fund, thus we pay only state tax on the dividend.
If you have sizable long term capital gain from the past, take your time to make the change so that you income don't get move up to the next tax bracket. Also pay attention to tax harvesting throughout the year to reduce the cost base. It is the unpredictable amount we had problem with.
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I ask because I'm thinking about a similar approach. In my first year of retirement, I'm considering the distributions as the next year's paycheck from this account, but that may not be the most prudent way to consider the transaction.
If you have sizable long term capital gain from the past, take your time to make the change so that you income don't get move up to the next tax bracket. Also pay attention to tax harvesting throughout the year to reduce the cost base. It is the unpredictable amount we had problem with.