Paying it forward to myself
January 7, 2010 3:29 PM   Subscribe

How can I start DRIPs as part of a Roth IRA?

HowToStartInvestingFilter: I want to purchase some dividend-bearing stocks and reinvest the proceeds over time to compound my returns. I would like to do this as part of a Roth IRA both for the obvious tax benefits at withdrawal and because I would not need to do any of the complicated tax accounting that's usually involved with DRIPs. What I would like is a centralized way to buy four or five different stocks with occasional (but not regular) additional contributions from me. I know individual companies offer DRIPs for their own stock, but besides the disadvantage of additional paperwork, I don't think they offer Roth IRAs!

Small startup fees are OK (I won't be particularly active, I think) but recurring fees are a big minus. All of the posts I found online are 2+ years old. Suggestions?
posted by trouserlouse to Work & Money (4 answers total) 2 users marked this as a favorite
All DRIP plans that I am aware of require that you own the stock directly, i.e., not through a broker. However, I am not aware of any way to have a Roth IRA that is not domiciled at a broker.

In any event, I tend to think the benefit of DRIP plans are overstated. For those select few companies that have them, their dividend yield tends to be rather small, especially compared to the rate of inflation and the return available on alternative investments.

Unless you can park a significant chunk of change (>$100,000) in one of these plans and not require the (minimal) dividend income therefrom, I don't really see much benefit to be had.
posted by dfriedman at 3:41 PM on January 7, 2010

Most brokers will automatically reinvest dividends for your stocks. I have done this at ML and UBS, and neither charged me a fee.
posted by charlesv at 3:46 PM on January 7, 2010

The Vanguard fund I have in my Roth IRA pays an annual dividend (only like 2%, but still), and that's set up to be automatically reinvested. I know that isn't exactly what you were asking about, but I'd most other fund providers would have a similar automatic setting to reinvest dividends.
posted by willnot at 3:49 PM on January 7, 2010

Yeah, my experience is that the broker that holds your Roth will just have a tick-box on the portfolio screen to reinvest dividends. It's not difficult, and I don't think I've ever been charged for it.
posted by Admiral Haddock at 4:21 PM on January 7, 2010

« Older How do I avoid waking up in the middle of the...   |   Help meDC restaurant for a dozen academics. Newer »
This thread is closed to new comments.