White Coat Investor Podcast WCI #444: Dividends, 457(b)s, Side Gigs, and 401(k) Wisdom
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Nov 6, 2025 Dive into the pros and cons of automatic versus manual dividend reinvestment and find out how to manage pension and 457(b) risks wisely. Learn about the nuances of forming LLCs for side gigs, including asset protection and insurance needs. James also clears up major pitfalls with 1099 classifications that often trip up professionals. Plus, get some strategic insights into maximizing contributions with the mega backdoor Roth for 1099 earners—perfect for anyone navigating their financial journey!
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Dividend Reinvestment By Account Type
- Reinvest dividends automatically inside tax-advantaged accounts like 401(k)s, IRAs, HSAs, and 529s for simplicity and no cash drag.
- In taxable accounts, direct dividends to cash and invest periodically to reduce tax lots, enable rebalancing, and avoid wash-sale issues.
Automatic Reinvestment Creates Tax Complexity
- Automatic reinvestment in taxable accounts increases the number of tax lots and can complicate taxes and reporting.
- Automatic reinvestment also interacts poorly with tax-loss harvesting due to potential wash sales.
Manage Employer-Account Concentration
- Differentiate governmental vs non-governmental 457(b)s and favor governmental 457(b)s as they are held in trust and rollable to IRAs/401(k)s.
- Limit exposure to employer-held retirement accounts; consider funding taxable accounts or capping non-governmental 457(b) contributions if >50% of savings are at employer risk.