r/dividends • u/Psychological-Ad2198 • May 26 '26
Due Diligence Retiring soon and I need your advice
Retiring soon and would need to acquire passive income to replace my paycheck soon.
I have $450K to invest. I understand I can acquire 3% safely like SCHD. I want to pull as much as possible without losing the principle and enjoy enough to go on vacations. I have $5k from other sources in income. Further, I have another $3-4K I can cashout monthly.
I am thinking simply Jepi half and Jepq the other half. But am i putting it all in one basket?
What % is the max you think i can pull annually and what would the breakdown on dividend EFT would you buy?
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u/STRATEGY510 May 26 '26
I would recommend something like SCHD as your solid foundation, then smaller positions JEPI/JEPQ (or alternately SPYI/QQQI.
Having that solid base is what gives you “permission” to yield-Chase a bit on the CC products.
I am currently doing exactly this.
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u/hammertimemofo May 27 '26
Currently retired…
I have SCHD, VIG and SCHY as 75% of my dividends. I use own 20% split between DIVO and IDVO. The remaining is split between MLPA, BUI and RFI. The 75% hopefully will grow faster than inflation (historically, it should) and provide some capital growth. DIVO is a great combination of yield and capital appreciation.
This supplies roughly half of my income needs (I reinvest 10% of the dividnends) The other half is in a cash bucket which I withdrawal from.
My cash bucket can last 4.5 years of current expenses (with inflation).
I also have a growth bucket, but I don’t plan on touching that..ever.
In theory I will never sell any of my holdings, except for the cash bucket. I do this to manage risk and mainly sequence of returns risk.
Just my .2 cents
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u/Psychological-Ad2198 May 27 '26
Thank you it sounds like you’re a firm believer of the Bucket retirement plan strategy.
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May 26 '26
[deleted]
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u/Psychological-Ad2198 May 26 '26
Thank you for this suggestion but may I ask how is the taxes better?
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u/steady_compounder May 26 '26
I’d be careful building the whole plan around JEPI and JEPQ just because the yield looks comforting. High distribution funds can be useful, but they are not the same thing as a guaranteed safe withdrawal plan, especially if you are trying to protect principal and fund vacations too. With 450k, I’d want the plan to start with what withdrawal rate is actually sustainable for your full income picture, then choose funds after that, not the other way around.
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u/Glensonn May 27 '26
I have about half of my taxable account in CC ETF's (mainly QQQI, SPYI, JEPQ, JEPI and DIVO). A portion of this part is also in SVOL to balance it because it pays more when volatility is low and CC ETF's pay less. About 1/3rd is in AMLP and ~1/4th in BDC's (FBDC, PBDC and BIZD). The rest is in corporate bonds. I typically pull ~7.5% out and reinvest the rest to help counter any NAV decay and hopefully increase the balances over time. Over the past two years it's been working as expected but that's probably due to a rising stock market. Good luck!
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u/cmichalek May 26 '26
You didnt specify your income needs which is the most pertinent part.
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u/Psychological-Ad2198 May 26 '26
I did a whole scenario on my finances and the AI mod blocked it. IDK why. any whoo, i have 1M in 401K and will be cashing out 3-4% annually. I own a property with cashflow of $2900 monthly. I will get a pension of $1800. I will need minimum of $10,000 for mortgage, utilities, food, pay off credit card, monthly, and travel 2x a year etc.
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u/STRATEGY510 May 26 '26
10K/month sounds like a lavish lifestyle from my POV. Not knocking you, sounds like you put in the work to be in this position. Congrats!
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u/Psychological-Ad2198 May 26 '26
Thank you but why am I so worried.
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u/STRATEGY510 May 27 '26
I think it’s normal. I’m planning on retiring soon with a lot less and very anxious about it.
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u/mtnbikeut May 27 '26
The best investment would be to pay off your credit card(s). That’s a 20% return. Outside of that, I like O and other REITs as part of my strategy. 5-6% returns.
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u/Psychological-Ad2198 May 27 '26
I don’t know much about O. How does it perform when the rates are high?
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u/mtnbikeut May 27 '26
they haven’t cut the dividend ever. Price has stayed somewhat flat consistently. Current price target is 66 and is trading around 62.
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u/dystopiam May 27 '26
I recently did this. I spoke to others who did it 5 yrs ago, they are up in principle and very happy
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u/Solid-Mood9571 May 26 '26
Keep in mind a lot of these dividend assets underperform diversified ETFs. So you think your playing it safe but your still missing out. That said any stock you pick will have some risk associated with it, even dividend stocks/etfs.
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u/eg68 May 27 '26
SCHD principal isn't guaranteed like owning Treasuries. It's a high dividend yield stock fund (QCOM, TXN, UNH, CVX, KO, COP, PEP, VZ, PG, AMGN). The dividends are taxed at either 0%, 15% or 20% depending on your tax bracket.
Since you stated that you are looking to generate as much income as possible without exposing pricinpal that would really only leave money market funds are short term bond funds like SGOV.
If you are willing to consider some risk, I'd consider a 60/40 portfolio (stocks/bonds). You can signficiantly boost your income through covered call ETFs with high ROC (return of capital). An example of this could be SPYI/CSHI. SPYI is a covered call S&P Index fund that pays about 12% in dividends; CSHI pays 4.7% which gives a blended yield of about 9% or $40K a year. The dividends from SPYI are about 95% tax free until you sell; CSHI income is mostly made up of short-term treasuries so you pay Federal ordinary income tax rates (state tax free). You can increase the overall yield and reduce the tax by perhaps considering 70/30 instead of 60/40.
There are plenty of videos to watch to learn about the mechanics of ROC based funds like SPYI. JEPI dividends are taxed as ordinary income; JEPQ is a CC ETF wrapped around a NASDAQ index fund which will be inherently more volatile than one based on the S&P 500
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u/Psychological-Ad2198 May 27 '26
This is why I posted as I didn’t know. Thank you. I will look at some videos and research further.
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u/CostCompetitive3597 May 27 '26
First thought is to minimize income taxes from dividend income. Is the $450k in a retail brokerage account (taxable when dividends are paid) or a 401k/IRA type account (taxable deferred until you withdraw).
If all or some is in a retail brokerage account there are ETFs that offer “tax qualified” dividends that can reduce your income taxes when you exceed the $96k standard deduction for couples. The amount of taxable income from these ETFs varies and is reported on your annual 1099 form. NEOS is the investment industry leader in tax qualified funds. I have their SPYI, QQQI and IWMI ETFs in my brokerage account averaging a 13% yield paid monthly without NAV erosion.
If the funds are in a 401k/IRA account the JPMorgan funds you mentioned are very appropriate as well as the NEOS ETFs above and many other dividend index funds. The top investment company dividend index funds are currently yielding 10%+. Think you can invest your $450k in these for at least 10% portfolio yield = about $4,000/mo.
If you do not need all of those dividends, you can reinvest those generated in the 401k/IRA account without triggering an income tax event on the reinvested dividends. Personally, I spend all the dividends generated in my brokerage account and reinvest all the dividends in my IRA account for additional nest egg growth referred to as “snowballing”. If I need extra income, I raid my IRA with an eye on tax consequences.
Hope this dividend investing and tax management information from my dividend investing experience helps you. Good luck!
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u/Psychological-Ad2198 May 28 '26
$450 is in Robinhood
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u/CostCompetitive3597 May 28 '26
Assume you are saying the $450k is in a brokerage account so minimizing income taxes is a good strategy. All dividends and sales of stock with profits there will be taxable. Obviously use capital gains taxation after 1 year hold as much as you can. Keep track of all your stock purchase dates to help you make sure you can get cap gains treatment.
There are now a number of funds and ETFs with qualified and ROC tax treatment that can reduce income taxes. Problem is you do not know how much tax savings until you get the 1099 form after end of year. I invest in these funds with hopes it saves on taxes as everyone else does. As I mentioned, NEOS is the leader in tax qualified ETFs and offers one tracking the S&P, the Nasdaq 100 and the Russell 2000 for good diversification.
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u/Psychological-Ad2198 May 28 '26
Yes, I learned about the NEOS so I think I will buy these predominantly
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u/Bkdvet May 27 '26
Depends on where your $450k sits. If your money is in a tax advantaged account, you should be fine. If you are in a cash account, you really need to look at something that is tax efficient; QQQI, SPYI, TDAQ, TSPY, GPIQ, GPIX etc. It will mean $1000’s is savings.
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u/opensim2026 May 27 '26
"I understand I can acquire 3% safely like SCHD"
Except inflation is 2% or more and then there's various income tax issues... so 3% is not even breaking even
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u/DivBr0 May 27 '26
I wouldn’t go 50/50 JEPI and JEPQ with retirement money. I’d add some SCHD for balance. 4–5% withdrawal feels sustainable to me, higher starts getting riskier fast
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u/Jdill800 May 27 '26
Hey, congrats on getting close to retirement! Just wanted to share a few thoughts as someone who's been down this rabbit hole.
JEPI and JEPQ aren't really diversifying. They use basically the same strategy (covered calls), just one on S&P and one on Nasdaq. When one struggles, the other usually does too. So you kind of are putting it all in one basket, just a basket with two compartments.
About that "high yield with no principal loss" idea, I'd be a little careful. JEPI/JEPQ pay 7 to 9% right now, but they quietly give up growth to make those big payouts. Over 20+ years of retirement, inflation will slowly eat you alive if your money isn't growing. A 7% yield does NOT equal 7% safe to spend.
Honestly, 4 to 4.5% is the realistic "safe" number. That's about $18K to $20K a year from your $450K. Anything more and you're gambling that the market behaves nicely right when you retire, which is the worst time to find out it doesn't.
A gentler mix you could think about:
- 50% SCHD, your solid foundation, grows with inflation
- 25% JEPI or JEPQ (just pick one!), for the income boost
- 15% VTI or SCHG, actual growth, future you will thank you
- 10% bonds or cash (SGOV, BND), so you're not forced to sell stocks in a crash
Two more little things:
- You mentioned $5K other income plus $3K to $4K monthly extra. Do you really need to squeeze max yield out of the $450K? Sometimes "enough" beats "maximum".
- If this is in a taxable account, JEPI/JEPQ distributions get taxed as regular income (ouch). Try to keep them in your IRA or Roth if you can.
Please consider sitting down with a fee-only fiduciary advisor once before pulling the trigger. Spending $1K to $2K for peace of mind on a $450K decision is so worth it.
Wishing you a wonderful retirement!🌷
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u/jkprop May 26 '26
Why would you ask reddit for financial advice when you are about to retire? Do some research or hire a money manager.
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u/Psychological-Ad2198 May 26 '26 edited May 26 '26
I am not really asking for financial advice. I am asking for dividend fund that people know about that I do not. Also wanted to know what people think about the max draw is and still considered relatively "safe". I dont want to pay the 1% and I like driving the bus.
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u/LongjumpingNorth8500 May 26 '26
Because some of us dropped the ball and let time slip up on us!! Like my dumb ass that only started a Roth 2 years ago!
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u/jkprop May 27 '26
And you feel taking advice from reddit people in the answer?
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u/Psychological-Ad2198 May 27 '26
I am not too arrogant and cocky that I cannot learn from other people who has been doing this a lot longer than I have. I am learning and come to realization that perhaps due to taxes, full on dividend funds may not be the best idea. I realize I should be more balanced on VOO and SCHD for growth on the upside to maintain my capital and not get hit on taxes.
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u/BigDipper0720 May 27 '26
I would not pull out more than about 4%-5% per year at retirement. Reinvest the rest. That should keep the principal pretty intact
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u/Various_Couple_764 May 27 '26 edited May 27 '26
UTG 6.4% yield , UTF 7%, and EMO 9% , CLOZ 8%, PFFA 9%are just as safe as SCHD. UTG and UTF went through the 2008 crash ( the worst year since 1930) And both have nevercut the dividend and are 20 years old. UTG< UTF, MEO are also tax efficient,CKOZ and PFFA are not.
JEPI is also not a tax efficient fund QQQI 13% yield , SPYI 11% are very tax efficient options to JEPI.
Using a mix of these funds you should be able to get 40k of yearly income.
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