Should I reinvest my dividends or take the cash?

If you do not need the money to live on, reinvest. Switch on automatic reinvestment at your broker and each dividend buys more shares, which pay their own dividends, and so on. The effect looks small each quarter and enormous over thirty years. Much of the market’s long-run return has come from exactly this.

The case for taking the cash: you are retired and using the income, or you would rather decide where the money goes. Some investors prefer to collect dividends from everything and reinvest them into whatever is cheapest, rather than automatically buying more of the same company. Either is reasonable; the point is that the cash gets invested somewhere.

On taxes, in a regular brokerage account, reinvested dividends are taxed the same as cash dividends in the year they are paid. Reinvesting does not defer anything. In an IRA or 401(k) there is no tax either way, which makes reinvestment the obvious choice there.

One housekeeping note: reinvested dividends count as new purchases, which slightly complicates the cost basis when you eventually sell. Brokers track this for you now, but it is worth knowing why your cost basis keeps creeping up.