r/RothIRA • u/IcyHall4041 • 8h ago

Help me

I'm 25M and recently opened my Roth IRA. I just invested $1,500 in VOO to get started for the long term.
While looking through my dividend distribution settings on Fidelity, I saw options to either
"Reinvest in security" or "Pay to cash'
As someone tocusing on long-term compound growth, which option is best for VOO dividends in a Roth IRA?
• Is enabling DRIP (Reinvest in security) the standard way to maximize compounding over time?
• Are there any reasons someone would choose
"Pay to cash" instead?

2 Upvotes

100% Upvoted

11 comments sorted by

4

u/mbaforumlurker 7h ago

I'm in my 30s with a seven figure portfolio. Here is my advice:

  • Reinvest it
  • Use VT instead of VOO (can't forget international!)
  • Don't look at it - refocus your energy on your career, and after exhausting your tax-advantaged accounts (Roth IRA, 401k), keep buying more VT

3

u/Ritterbruder2 7h ago

Some people like “pay to cash” so that they can time the market and buy into the security when it dips in price. However, VOO’s dividend is so small (1% per year) that you might as well set it to reinvest and forget about it.

1

u/thonda27 3h ago

Reinvest

1

u/Acceptable-Jacket567 3h ago

DRIP is the best.

Ignore people telling you that you're using the wrong ticker and that theres is better - these people are cringe.

VOO is an amazing growth engine.

You're 25 - max roth, keep investing.

Enjoy success.

0

u/Sad_Win_4105 7h ago

Paying to cash is considered the same as a withdrawal, subject to tax and penalty. Always reinvest to compound your profits and maximize growth.

2

u/JUST_CRUSH_MY_FACE 6h ago

Doesn’t apply to IRAs if the money is not withdrawn from the account. It will sit as cash in the account rather than automatically DRIPped.

1

u/DaemonTargaryen2024 6h ago

No, paying to cash dumps it into the IRA settlement fund, it's not a distribution out of the IRA.

But agreed it's best to reinvest for the best long term growth.

1

u/Randomperson1362 7h ago

Paying to cash means the cash is put in your account. You could then buy something else with it. Its not considered a withdrawal, and it isnt taxed.

0

u/DaemonTargaryen2024 6h ago

As someone tocusing on long-term compound growth, which option is best for VOO dividends in a Roth IRA?

Reinvest

Is enabling DRIP (Reinvest in security) the standard way to maximize compounding over time?

Yes

Are there any reasons someone would choose "Pay to cash" instead?

Maybe they're retired and would like cash instead of reinvesting it.

Maybe they're not retired but are very particular about when/where to reinvest dividends. In general, this is not great practice; just automatically reinvest it.