Why Retirement Accounts and Dividend Stocks Go Together Like Peanut Butter and Jelly
Peanut butter and jelly are good individually, and great when paired together. The same dynamic exists between retirement accounts and dividend stocks. Read on for three reasons why holding dividend stocks (or funds of dividend stocks) in your 401(k) or IRA could be the retirement strategy you need.
401(k)s, traditional IRAs, and Roth IRAs share a valuable tax feature -- tax-deferred earnings. This means you don't pay taxes annually on dividend income in these accounts. You also won't pay annual taxes on realized gains or earned interest.
If you hold dividend stocks in a taxable account, you probably owe 15% or 20% of your dividend income to the IRS each year. But in your retirement account, you can leave those funds invested. And the more money you have invested, the faster your balance can grow.
Source Fool.com
