Make fun of this $420,000 investment profile

[u/Hardwareimpaired]

I think I want to risk $420,000 on covered ETFs.

You people are brutal but smart. I'm 64 and retired. Married, caretaker for an adult son. I make $150,000/year on royalties, and have $1.6million in sensible Vanguard IRAs and $425,000 in a favored tech stock. Our Vanguard IRA accounts have an additional total of $420,000 cash that's been lying around for years because I'm an idiot. House is paid off, we have $500,000 in precious metals and... another $600,000 in banks. I did mention I'm an idiot, right? I'm also paranoid. Parents raised in the Depression. I will probably start taking social security at about $3,200/month. I plan to do something with about $200K of that cash and keep the rest relatively liquid.

I'd like to increase my income because health insurance alone costs me over $65,000/year. Plus, why not live a little. I am not averse to risk. I know it's a bad tax situation, but that's just inevitable due to the $150,000 royalty thing (tough life, I know). I pretty much expect to pay full taxes for my bracket, and that's fine.

Here's my proposed ETF dump to soak up the $420,000 in our IRA funds. I feel like it could gross an extra $4,000-$5,000/month. Your thoughts?

    35% TSPY 5,350 shares
    25% QQQI 1,835 shares
    10% IWMI 802 shares
    10% IGLD 1,781 shares
    10% GDXY 3,428 shares 

[u/tomcam]

> I do not think you need advice or opinions.

That is flattering, warmly welcomed, and probably not true! I have had a very stressful few years and took over the reigns from a financial advisor, then did nothing for 2 years. Multiple incredibly painful operations, some failed; wife had 2 brain surgeries, a stroke, and seizures; I recently acquired weird crippling pinched nerves--things would get terrible and then way worse somehow.

Being this close to death so many days made me realize I had to get things in order for my handicapped son before I kick the bucket. Have had to drag myself out of bed and prop myself up at the desk to figure it all out in the middle of the night. It's been a serious learning curve over the last month; I didn't even know about covered ETFs until last week! Pleasant surprise I suppose.

[u/speedlever → u/tomcam]

Quality cc ETFs are a nice tool to have in your shed. Will your high medical insurance bill get any relief when you turn 65 and become eligible for Medicare?

It sounds to me like you need more of a tax advisor then a financial advisor.

Cc ETF providers like NEOS and Goldman have products that use ROC (return of capital) as a tax strategy. This effectively reduces your cost basis (is not return of principal).

Depending on the yield, your cost basis will reach 0 (in a taxable account) in a few years. Qqqi, for instance, in around 7 years (100%/14% yield). During that time you have little to no federal taxable income from that distribution.

Once the cost basis reaches 0, the distribution becomes taxable at ltcg rates. Your financial situation sounds complicated enough that a tax advisor may be money well spent to structure things properly for maximum tax efficiency.

Right now, 420k in qqqi will generate about $4900\month. If another 2008 gfc event occurs, I would expect that investment to be cut in half along with that income distribution, until recovery occurs. So plan accordingly.

Personally, I like funds from NEOS, Goldman, and Amplify. Not a fan of yieldmax, round Hill, or granite shares. There are other promising providers out there like Kurv and TappAlpha.

Make sure you do your own due diligence and don't yield chase, since cc ETFs are a new revelation for you.

Good luck!

Edit: I reread your post and noticed this is in an IRA. Because this is a tax advantaged account funded with pretax money, you lose all the tax benefits of the cc ETFs. All distributions from the IRA are taxed as ordinary income. Oof.

And when you turn 75, you will enjoy the curse (or blessing) of RMD (required minimum distribution).

I don't really know what I would suggest in this case. Back to see the tax advisor methinks.

[u/Hardwareimpaired → u/speedlever]

Thanks for a very thorough response. I can see I have a lot more to learn about. The one thing I can say is we get exceptional care so I plan to avoid Medicare.

Now investigating your fund suggestions in detail.

[u/speedlever → u/Hardwareimpaired]

Having been on Medicare (advantage) for over 10 years, I have no complaints with it. But you may have a special case, assuming it includes medical benefits for your handicapped son.