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For those investing through tax-advantaged accounts like a Roth IRA, dividends are generally tax-free as long as the conditions are met—namely, that withdrawals occur after age 59½. Inside a Roth IRA, dividends and earnings remain sheltered from taxes and automatically reinvest, compounding growth over time.
However, a crucial point was made: Roth IRAs are not designed for early withdrawals. Pulling funds out before age 59½ can trigger penalties and taxes. Therefore, while dividend investing in a Roth IRA can support long-term growth, it should not be seen as a quick-access passive income source before retirement.