• Mutual Fund Dividend Calculator

Reducing your investing fees is the best way to generate higher total returns.

Dividend Investing In A Roth IRA. (called a contribution). You take money out of your Roth IRA without paying additional taxes to fund your retirement (called a distribution. Stock Calculator for Calculating Return on Investment. While I do research each calculator's subject prior to creating and upgrading them, because I don't work in those fields on a regular basis, I eventually forget what I learned during my research. After receiving $23 in dividends and paying $10 in sales commissions, your stock return. Individual Retirement Arrangements (IRAs) can be a great way to save for retirement because of the tax benefits they can provide. If you're eligible, you can choose a traditional IRA for an up-front tax deduction and defer paying taxes until you take withdrawals in the future. Or, if eligible, you.

Mutual Fund Dividend Calculator

Most investors focus on minimizing fees from their brokerages. If you made four trades a month (two buys and two sells) over 30 years, that comes to $14,400 at $10 a trade.

If you get serious and shop around for a cheaper brokerage, you could reduce trading costs to $5 a trade (as an example). This would result in savings of $7,200 over the course of your investing career.

• Distribution must be made after the five-year period beginning with the first tax year you contributed to the Roth IRA.
• Distributions can only be made on or after you turn 59½.

Source: Roth IRAs from the IRS

The advantage of dividend stocks in a Roth IRA

The advantage of a Roth IRA is that it allows your investments to grow tax free.

In effect, you pay your taxes before your investments compound, instead of after.

In normal accounts (nonretirement accounts), qualified dividends are taxed at the long-term capital gains rate of 20%. Nonqualified dividends are taxed at 39.6% (both numbers are for the highest income tax bracket).

Instead of paying taxes on these dividends every year, dividend payments are left in the Roth IRA. They can (and should be) reinvested either into the stock that paid them (called DRIPing) or into other high quality dividend growth stocks.

Over time, these tax savings can add up to thousands of dollars…

The image below shows the account value of $10,000 invested in a stock that grows at 6% a year and pays a 3% a year dividend (dividends are reinvested). A 20% dividend tax rate is assumed.

• Roth IRA balance after 20 years of $56,044.
• Regular account balance after 20 years of $50,186.

I’d rather have that extra $5,858 after 20 years (for no extra work).

Remember, dividend income in a Roth IRA is not taxed. It does not count toward your annual contribution to the Roth IRA, either.

Avoiding dividend taxes is a plus in a Roth IRA, there’s no question about it.

Roth IRAs can save significantly more money by eliminating capital gains tax every year. The higher your portfolio's turnover rate (and gains), the greater the tax savings from the Roth IRA versus a normal (nonretirement) account will be.

Required minimum distributions in a Roth IRA

Traditional IRAs and 401Ks have something called a 'required minimum distribution.' You are forced to take a certain amount of money out of your retirement account every year after you turn 70½.

Roth IRAs do not have required minimum distributions.

This gives them greater flexibility. Your money is free to compound in a Roth IRA as long as you are alive. Required minimum distributions do not start until after you pass away and your beneficiary gets the Roth IRA.

No required minimum distributions means a longer compounding window and more time to grow your dividend snowball.

Build your dividend growth portfolio in a Roth IRA

If the ultimate goal of your portfolio is to fund your retirement, then a Roth IRA is a good choice.

The tax advantages of a Roth IRA allow you to benefit from the power of compounding without giving Uncle Sam his 'fair share.'

Do not fall into the trap of trying to maximize your tax savings at the expense of maximizing your total returns in a Roth IRA. What does this mean?

It means don’t invest in ultra-high dividend-yielding stocks (which carry too much risk) to try to wring every last ounce of tax savings out of the account.

Instead, invest in high quality dividend growth stocks with favorable total return prospects. The 8 Rules of Dividend Investing will help in:

• Finding high quality dividend growth stocks.
• Determining when to buy.
• Determining when to sell.

How to open a Roth IRA

Roth IRAs can be opened by individuals at many well-known brokerages.

A brief list of well-known brokerages that offer Roth IRAs is below. Brokerages are sorted in order based on transaction cost.

• TradeKing – $4.95 per trade.
• Merrill Edge – $6.95 per trade.
• Scottrade – $7.00 per trade.
• Vanguard – $7.00 per trade.
• Fidelity – $7.95 per trade.
• ETrade – $9.99 per trade.
• TD Ameritrade – $9.99 per trade.

Fees matter in investing. The less you pay the government (by using a retirement account like a Roth IRA) and the less you pay your brokerage (by minimizing transactions and transaction costs), the more money is left in your account to compound – where it belongs.

(Published July 12)

This article originally appeared HERE.

Don’t forget to account for dividend reinvestment. The process above is designed to work for relatively simple cases where the number of stocks owned is a fixed quantity. However, in real life, investors often use the dividends they earn to buy more shares of stock in a process called 'dividend reinvestment.' By doing this, an investor sacrifices a short-term dividend payout in favor of the long-term gains that can result from owning added shares. If you've arranged for a dividend-reinvestment program as part of your investment, keep an updated tally of shares you own so that your calculations will be accurate.^[4]

• For instance, let’s say you earn $100 per year in dividends from one of your investments and that you arrange to have this money reinvested into additional shares every year. If the stock trades at $10 per share and has a DPS of $1 annually, spending your $100 will get you ten more shares and another $10 in additional dividends per year, bringing your dividends to $110 in the next year. Assuming the stock’s price remains the same, you’ll be able to buy eleven more shares the following year, then about twelve the year after that. This 'compounding' effect will continue as long as you let it, assuming the stock price remains stable or rises. This focus on dividends as an investment strategy has made some people rather wealthy, although, alas, there are no guarantees of spectacular results.