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Vanguard Settlement Fund
I started my SEPP on March 3, but I noticed that instead of reinvesting my divident that my settlement fund had about $600. I guess I forgot to do automatic reinvesting of dividends. I only withdrew the actual amount permitted by the SEPP program (5%) and the valuation was based on the initial value of the investment. Can I just move that $600 back into the IRA?
That dividend should still be in your IRA; the fact that it's cash doesn't automatically remove it from the IRA account. And yes, you can re-invest that cash.
You can also change the settings on the account so future dividends will be automatically reinvested, it's not too late to start doing that. Select "Account Features" from the menu, then "Brokerage & Trading" and under that select "Dividends and Capital Gains".
If you reinvest the dividends, then you will have to sell some investments before you make distributions. Cash will be needed not only for the distribution to you, but also for Vanguard (or any account) to send cash to the IRS (and state, except PA) for the taxes that should be withheld, unless you are filing estimated taxes, in which case you will need the total GROSS amount of the distribution in cash either way.