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Make smart financial moves that maximize returns while minimizing taxes.
Dividend stocks pay regular income to investors from a companys profits, offering retirees a steady cash flow.
Dividend Stocks Offer Stability
Dividend stocks can offer stability, but selecting the right ones is essential.
However, high yields can sometimes signal corporate stress, so yield alone shouldnt be the primary focus.
These stocks can offer both stability and favorable after-tax returns.
The real advantage comes with whats known as unrealized gains.
These are gains that accrue as the stock price rises but are not taxed until sold.
For retirees, holding onto these investments for the long haul can result in significant tax savings.
The Tax Perks of Patience
One major tax advantage of dividend stocks is their capped tax rate.
Ordinary dividends are taxed at a maximum of 23.8%, roughly half the top tax bracket rate.
However, the real benefit is the potential for tax-free growth.
The key is to resist the urge to frequentlytrade or cashin dividends for short-term gains.
Many investors find comfort inbig mailbox checksthat get re-deposited and never spent, he said.
However, this cycle can generate more overall taxes.
Advocate for more people to become shareholders.
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