Meow's Dividend Journey - Should I Count Retirement Accounts?

I hate to say that I've cannibalized my dividend account a bit. That's right, I've sold something. Last week, I said goodbye to 83 shares of CCP. Nothing was wrong with the stock. The dividend was healthy. The stock itself was healthy. I was happy with CCP. And yet, I cashed it out.

Before you wag your finger at me, let me explain. It was for a very good reason.

See, in addition to an IRA, I recently opened up a Solo-401(k). Your employer usually provides you with your 401(k), but since I am a freelancer, I am my own employer, so the government lets me make my own. So, no longer having an excuse not to hop on the 401(k) train towards a happy retirement, I got off my butt and opened one up.

I made a maximum contribution to my IRA at the beginning of the year. Now, I am trying to put the maximum contribution, $18,000, in the 401(k). Both are traditional style accounts, meaning at my income, I get a tax deduction for contributions. This not only helps me bring my taxes down this year, but it also means that the money I stash in these special accounts gets to grow tax-free for all the years until I am allowed to withdraw it after I'm 59.5 years old.

However, at my income (let's just say I am not a high earner), it's pretty tough to max out both and still be able to do things like eat and buy a bus pass. This meant selling something out of my taxable account, the dividend account I have slowly been cultivating for years, to help raise those funds. Hopefully next year I will be frugal enough to do it from my paychecks without having to dip into savings.

This brings me to a very good question. Should I be counting dividend income from my IRA and 401(k) as dividend income?

It's entirely an aesthetic question. After all, whether I count these dividends as part of my dividend journey or leave them out has no bearing on the actual value of my accounts.

The Case for Yes:

1. Other bloggers do it. Not that this is a race or anything. Just look at the Dividend Diplomats- a great deal of their dividends come from the tax advantaged account.
2. It's real money. Just because it's in an account I can't touch for a while doesn't mean those aren't actual dollars multiplying in there. Shouldn't I count them and celebrate them? After all, I sacrificed meals out, new clothes, travel and cute kitchen equipment to get them. Which brings me to the next point:
3. The purpose of tracking my dividends is solely to motivate me to save. It's not meant to be a measurement of how much I can spend, or anything like that. I pretty much just track my divs to throw myself a party.
4. I don't want to feel like I'm "missing out" on dividends when I choose to fill up tax-advantaged accounts instead. Quite the opposite- all I'm really missing out on are extra taxes (and the ability to spend that money when I choose)...

The Case for No:

1. That's part of the retirement fund, which means I need to pretend like it doesn't exist until I'm 59.5 years old or can convert it to a Roth using that sneaky ladder ninja technique.
2. My investments in the retirement accounts aren't dividend oriented. Since they're so very long term, they're invested in index funds. Since I can't touch either the gains or the dividends for many years, there is no joy in seeing frequent dividends dropping into the account.
3. Because these investments are all index funds, the dividends they do distribute all come during the same months.
4. Even though I don't really plan on spending my dividends now, it's still nice to have that "passive income" number in case I lose my job and don't want another one. Including retirement accounts kind of throws that off, since it's unavailable money.

At the moment, I am truly undecided.

 Dividend Blog friends, what's your take?


  1. I do. I definally think you should. Its dividend income and is probably getting dripped or reinvested. I see the argument that u cant use it til 59 tho. Also you might find yourself slanted to accumulate in the account that you are bloggin about, vs the retirement account.

    Personally ill blog about any passive income i receive. Keep it up and add those accounts.

  2. From my perspective it's not about what type of account it is, but rather, what type of investment it is (The Case for No, argument #2).

    For me the whole point of "counting" passive income is to project when that amount exceeds expenses and we can say we're financially independent. Dividends from index funds are totally unpredictable. You can't reliably project anything from them.

    Secondly, passive index investments are all about TOTAL returns. That's why they're set to just automatically reinvest and no one really cares what the dividend is anyway. A portion of the returns comes as dividends and another portion comes as share price appreciation. The passive index investor isn't interested in how much of which they get, just what the total is.

    For me the distinction is automatic reinvestment. If it's set to automatically reinvest, it's because it's a "total return" investment rather than an income investment.

    Many dividend investors automatically reinvest the dividends from individual stocks and still "count" the payments as income. I can see the case for this, since you could always turn it off and use that income another way. The amounts are at least predictable with individual stocks.

    But IMHO it makes no sense to track distributions for automatically reinvested mutual funds. They're not really meaningful numbers.

    1. I agree with you on that one. What's the point of counting dividends for non-dividend-oriented investments? Might as well count total gains, but I don't like counting gains over short time spans- it makes you more sensitive to the natural ups and downs of the market.