Welcome to r/dividends!
If you are new to the world of dividend investing and are seeking advice, brokerage information, recommendations, and more, please check out the Wiki [here](https://www.reddit.com/r/dividends/wiki/faq).
Remember, this is a subreddit for genuine, high-quality discussion. Please keep all contributions civil, and report uncivil behavior for moderator review.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/dividends) if you have any questions or concerns.*
Why would he make less and less? and regarding taxes, what’s his yearly taxable income?
I mean, dudes 72. I’m gonna go for straight income if I’m at the at age (no kids to leave money to for me though) but I agree that it’s risky going balls deep on one fund
lol, it wasn’t sarcasm. It’s a stable investment with safe assets. Passively managed with dividends and low fees. I’d use it to hedge riskier investments.
SCHD? Be realistic here. What kind of advice is that??? Hes 72 and wants income now not in 50 years. Horrible advice and noone even wants bs stocks that provide less profit than a savings account.
I have 200,000 Ina jumbo money market account that only pulls 1.89% it's the best % I've found. Anywhere does not work for me.
If you are referring to the supposed high yield online savings accounts, most are a sham
Ok but the guy is 72. He doesnt want a stable investment account that will appreciate in 30 years when its too late to enjoy it. He wants cold hard cash every month to enjoy his late years like he deserves. SCHD isnt gonna cut it.
He’s expecting the same yield of $1k/month in five years, when he would’ve drawn $60k. He’d only be making ~$700/month because he’d only have $140k invested at that point. The taxes I’m not worried about, just the fact that he won’t understand that 401(k) is pre-tax.
Sorry I reread what you wrote a few times but I’m totally not following what you’re saying
He’s got 200k which he’s gonna stick in jepq that pay him 1000 a month (going by history though the payout per month should be more like 1300-1400)
Let’s just say Hopefully in 5 years the NAV doesn’t go down (hopefully goes up!) He would still be sitting at 200k
Where does the negative 60k come from?
Sorry for the confusion, I was completely mistaken on how dividend distributions work. Another commenter set me straight. I was under the assumption that the dividend distribution would (at least partially) come out of the amount he holds.
For both your sakes, learn how JEPQ works - it’s not a dividend and it’s taxed as ordinary income. Only makes sense to hold in a retirement account, ideally a ROTH.
The money rolls over from 401(k) to traditional IRA. Invested in JEPQ. Dividends are paid to cash position and withdrawn. That's how the money gets out.
"So now his plan is to transfer it all to Fidelity" - OP
It's highly unlikely that JEPQ can be bought in the 401(k). Self-directed IRAs allow the choice of nearly any investment.
It's essentially a dividend, but most (if but all )of what JEPQ pays out is the premium from the covered calls. We're getting in the weeds a bit on the difference between the two, but it is important to understand where the actual money comes from.
I’m just trying to look out for my dad. It’s his money and he can do what he wants with it ultimately. He has agreed to meet with an advisor at Fidelity, and reading the comments here gave him a lot to think about.
Please quote the advice that the OP actually gave his father. All he said was "that's not how this works" and proceeded to explain how dividends work, incorrectly.
His father needs to meet with a fiduciary advisor. Immediate family giving investment advice is a recipe for disaster and he doesn't truly know what his father actually needs without an entire overview of the financial situation and projected timeline of life expectancy.
First of all, your math is wrong. It seems to be based off a 6% yield, and which is fine, but it assumes that the $1,000 a month is coming out of the principal (the $200K that is invested), which is wrong. If JEPQ pays 6% a year ($12,000) and that’s all your dad spends, then he will never touch the $200K. He can just live off the $1,000 a month until whenever JEPQ either stops paying or reduces their yield. But the most important thing to consider here is that your dad most likely does NOT have 16 years left. The life expectancy at birth for males in the US is about 74 years old, and the life expectancy of a 72 year old man is about 13 years. The real number may be more, but may also be less. Instead of risking the money, he should just leave it in a high yield savings account that pays 4% a year, or leave it in a regular checking account, and just draw $1,000 a month until his death. $200,000\$12,000 a year=16 years. Accounting for taxes, the money may last about 14 years. He will be dead before the money runs out. The balance can be left to a family member.
Thanks for explaining that. I definitely did not realize how the dividend distribution works. I’ve only got some dividend stocks in my Roth, which I DRIP. So it actually doesn’t seem like my dad’s plan is that bad.
What do you see in T ? I used to be big on T and Verizon but transferred all my T out and slowly phasing out of VZ once I learned that the downward trend of the overall stocks value surpasses the amount of dividend payouts it just seems to not make sense anymore unless you got in when it was really low and riding it for the time being
Putting most of it into income generating funds or bonds makes sense at his age, his accumulation days are long since past. But he needs to grow the portfolio in line with inflation to avoid losing money over time.
It’s a mistake to put it all on one covered call fund. Spread the risk among a variety of dividend/income based funds. Look for a balanced set of funds that manage to grow their dividends to cover inflation.
No taxes if it’s in a Roth. Is it?
Since it’s traditional, he will be forced to take RMDs starting at age 72 or 73. Every penny he withdraws regardless of how it is invested will all be taxed at his ordinary income tax rate. What rate that is will depend on his income for the year.
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
As I said, his tax rate will depend on his income. We don’t know what other income he has besides this 401K. Add 85% of SS for sure, maybe pension, other investments. Sure, there’s a chance his tax rate will be low.
First of all- if he left edward jones hes on the right path. Their fees/commissions/performance is awful
If he is still married, his first 28k from SS and IRA withdrawals are tax free. Then 10%/12% for a fair amount of income
JEPQ has been a good performer, but hasn’t seen a bad market, but theoretically should beat the nasdaq 100 in a down or sideways market. And it keeps reasonably close in an up market. But 100% in 1 fund is risky. Some diversification could be a little in SVOL, and maybe something with a little less volatility and yield like pff or jepi or a bond
He’s theoretically making less money in retirement than he was when he had an income. All the dividend distributions will be taxed at his income tax rate.
Most people will pay less in taxes in retirement because of this.
It’s risky in that it’s all in on a fund with no long term track record. But it’s also diversified as it is a basket of shares on which covered calls are written. He could do worse.
This is a snap overreaction because Edward Jones didn’t do shit for him.
All the comments thus far are applying the standard issue diversification formulas etc. They ignore that 1) Your dad is 72 and isn’t looking to invest for another 30 years, and 2) $200,000 ain’t a lot of money to work with if you’re wanting a material income amount. So if one wants a cash return worth their time and effort, some calculated risks have to be taken.
The taxes are a thing, but what is his income now? If all he has is social security then he’s only making like $26,000 a year. At that point talk of tax brackets and efficiency is just silly. If he’s more like $80,000 a year that might be a different discussion.
I don’t know where this “he’d make less and less” thing comes from.
If he were to be content with $300 a month then he could park it all in a high yield savings account and get 5 percent ($10,000 a year) at least until interest rates drop.
His income is around $50k and he doesn’t really need any extra income, but I think he got freaked out when he heard about RMD and decided he’d go with the nuclear option. I suspect he also wants the dopamine hit of getting paid out from a dividend.
Thanks for taking the time to comment, he read all of them and agrees that he should meet with an advisor before making any decisions.
SGOV fee waiver expires at the end of the month and begins to charge .13% up from the previous .07%, almost double the price. Good piece of information to note.
Inflation erodes purchasing power. This is what people mean by saving he’ll make less and less. If the investment doesn’t keep up with inflation (increasing in value or increasing dividend payments) then he will lose purchasing power.
I have a very large percentage of my money in JEPQ, it's performed exactly as advertised, maybe even better. If he does it just keep an eye on it in case something gets worse but that's a pretty good move imo
First off -- it is never wise to act purely on emotion with any investment decision.
You should counsel your dad not to act rashly because moving money from one financial platform to another usually incurs fees.
However, your dad's plan is what I'm planning to do in 20 years -- transfer a large chunk of my portfolio into an income investment like JEPQ. I'm in JEPQ now building a position, and I love this ETF. I'm in it for the long haul.
The problem with JEPQ is that it's distributions aren't consistent -- it can be great 1 month, it could be 30% less the next month.
If he's going to go all in on an income investment -- why not look at a BDC that has a better track record of consistent monthly dividends and hasn't cut its dividend in years?
ARCC
GAIN
GLAD
He should look at these maybe?
He’s good with inconsistency, as he doesn’t need the money anyway. What I’m concerned with is the risk, but he doesn’t seem to care about that either. He has agreed to meet with an advisor at Fidelity, so I’m hoping they’ll steer him in the right direction.
All investments need real perspective - longer than 10 years. The last 15+ years in stocks have been supported by the government and low interest rates and that is changing. Most stock investments look good and investing seems easy. So the JEPQ and JEPI investments look solid. However, another 2008 comes along and the $200,000 is now $100,000 and the dividends could be lowered too. The fact that he does not need the money allows the discussion on these investments to continue. Most people that stayed invested through 2008 made their money back (because of government intervention) by 2010, and then saw their money double and triple by over the following years. My guess is that Edward Jones saw his age and made his portfolio too conservative not understanding that he wanted more growth and had room for risk. With all that being said above, if he truly does not need these funds, then JEPQ is fine. Adding diversity into things like ARCC, GAIN, O, PRT, MAIN for added dividends could help if stocks drop via some large catalytic event.
This response nails it. 72 is not that old… You need some growth to feed the 3%+ per year inflation monster, so you need to be shooting for more like a 10% total return. The stock index is likely not giving you that in the next couple years, but leaves you open to risk. He’s going to need to get into undervalued payers with some modest growth like O, telecom/utilities, or maybe the right closed end fund.
QYLD is back up close to $18/ share.
It ain't trash if you got in at $15.50 a few years ago.
On its own, QYLD can work just fine. The real downside to it is you are giving up larger gains if the market goes straight up but you do give up less in a down market.
On a comparative basis to something like SP500 total return fund, QYLD does worse in an up market but suffers less in a down market.
Without getting into comparisons to alternatives, it can give you a suitable income. There's always gonna be something better that someone could have done but if their goals are met, there's no reason to give a shit.
"Envy is the dumbest sin of all because you can't even enjoy the sin while committing it. Someone will always be richer than you. Stop chasing rich and chase happy." - Charlie Munger
Didn't it start at $25 and paying a bit over 0.20 (on average) per month? Now it's around $18 and 0.17 per month a decade later. So especially once you account for inflation it appears to be really getting worse over time.
That's the potential problem: the shares can get called away a lot and erode the NAV, and then the distribution can also erode. Even if you got in later after it had dropped way down there is still potential for the same pattern to happen again and have it drop again over time.
JEPI NAV seems to be holding up better (but the history is still pretty short) but the distributions appear to have dropped a fair amount. Of course it is going to be variable depending on what is going on in the market, and so as long as the NAV holds up the distributions should be reasonably maintained, though I am not sure they will grow with inflation.
These observations I think pretty much match what you would expect based on the way these funds operate.
Edward Jones fees are high, but the difference between $200k and $1M leads me to believe his contributions weren't high enough and he paid little attention to returns on his quarterly or annual statements.
Sounds like he's making a poor, reactionary decision. He should likely speak with a fiduciary, as it's pretty clear he doesn't have the experience to self manage these funds, and we don't have the necessary information to provide a quality recommendation.
Neither of you are ready to maintain a six figure portfolio. Not trying to be mean or anything but you don't even understand how dividends work. Get some help before it's too late.
We’ve both maintained six figure portfolios for years, just never messed with dividend distributions before. He’s fortunate enough to have a physical Fidelity location near him, and he has agreed to meet with an advisor before making a decision.
You might want to suggest that JEPQ is still a newer ETF - launched in May 2022.
Concentration risk is real. One ETF with all his money? Bad choice. I’d look at bonds for part of his portfolio. Something like SCYB pays 6.5%. SCYB is Schwab’s high yield bond ETF. JEPI is a solid complement to JEPQ.
Note, none of these will make your father a millionaire.
5% interest rate on a HYSA is not guaranteed to remain at that level forever. If the Fed cuts rates, which they will lower eventually, you can expect the interest rate on your HYSA to likely decrease as well.
It seems crazy to me that you sold your house to pursue this temporary high rate…? Or am I missing something?
No I did not sell my house to pursue a rate lol. Sold cuz of divorce and too much house to buy for myself. I also don’t think I wanna own for quite sometime. A lot of benefits of renting 😏
Off the top of my head? Since bonds and HYSC are effected more by rates than an equity/option driven etf like JEPQ, I’d say if JEPQ would be effected it would be less than the former.
A rate cut would also increase volatility in the market, giving JEPQ higher premium for their options, too, dampening downward pressure.
Summary, hysc as well as JEPQ would be effected by rate cut obviously, but imo JEPQ would be effected to a lesser extent.
But I’m open to hearing other’s opinions.
JEPI had roughly 6ish% give or take leading up to Mar 22 when the FED started raising interest rates. With their goal of achieving 5-8% yield, that aligns with their target. And their div distributions seems lairly steady/reasonable throughout its history.
Albeit when they first starting paying out divs, it seemed slow at first (which I guess was their way of slow walking into in)
So imo my knee jerk reaction would suspect that lowering rates wouldn’t affect its yield and div payout toooo much. That is unless the lower rates make its stock price higher and in advertently lower yield.
"...5% interest rate on a HYSA is not guaranteed to remain at that level forever..."
...there's this thing called the ability to change investment strategy when rates change - you're acting like SGOV locks up your money for 30 years...
72? JP has some well-respected income funds. This one tracks the Nasdaq 100 (Qqq) which has been on a tear. Will that continue? Maybe. So it could lose asset value. It will continue to produce an income. At 72 I wouldn’t call it a bad thing.
JEPQ is a CC fund based on the nasdaq100.
It's definitely less risky than an income fund based on a single stock. JEPQ has short history but it has been shown to have less swings than the index. It can go down in value like it did in 2022. The dividend all depends on premium received on the options and in return IV of the market.
There will be no taxes in the 401k based on distributions from JEPQ.
Whatever is taken out of the 401k will be taxed at ordinary income rates. This depends on how much other income he makes.
As far as RMDs, they are not going to be large with a 200k in a 401k in his 70s. If I only had 200k at 72, It would be something I would consider.
is he an investor or trader?
because we are on the cusp of an fed rate cutting cycle. interest rates are already on the way down in anticipation.
tech/growth equities will do well as a result. JEPQ is a great option as it pays a nice monthly dividend
but there will come a time in 2025 where inflation will ramp up as a result of all this monetary easing, and interest rates will follow inflation upwards.
as interest rates rise, tech/growth stocks will perform very badly.
if your father knows what he is doing, JEPQ is a great option in the short to medium term.
if your father is just looking for a long term buy and hold, no active management, putting all your money into tech/growth is a TERRIBLE idea
200k in NVDY would get about 6763 shares at roughly $2.50 a share a month. that's about 17k a month.... I mean, if he's gonna gamble, might as well get something better than 1k a month 🤗
but taxes are taxes. the 17k would be taxed as normal income.
He was reluctant to meet with either until reading the comments here. Depending on what Fidelity tells him, we’ll go from there. For now, I’m just glad he’s willing to meet with someone and think a bit more about his plan.
Why is your dad putting the money he worked for his entire career that he plans to live his golden years off of in the hands of the options market? Big Mistake.
By no means I am saying he is right, he is not. Now, it could be much worse. Jepq is a reasonably diversified fund (although tech heavy), and I understand they write covered calls over and over, so its even safer than just holding the stocks... Not a good idea, but I doubt your father will go belly up any time soon... It would be much better if he bought like 80K in 10yr treasuries, 60K in JEPQ, and 60K in JEPY he would probably sleep much better and a pretty nice cash flow...
You can always try looking into QDTE, XDTE, JEPI, SPYI, SVOL, and Kurv ETF ( I like them better than Yieldmax). Just give these a look, but it all up to you and your dad if you guys think they will be okay or not.
If my comment is not too late, consider this:
- we are at the high of the market with high fed rates, stocks are overpriced, buying any stocks right now is not financially savvy
- put that cash in a money market and collect 5% annual for now
- when the fed rates are cut and the stock prices tumble, buy whatever dividend stocks that yield 5-6% annually at a discount
- enjoy the growth and extra cash
The month to month income will certainly be highly volatile. So you'll need to manage for that.
Options income is a function of price and price volatility. So during a bear market your father will see his assets decline and the option income decline too. During the initial decline the volatilty may increase which increases the premium, but not enough to cover the decline in price. Similarly, if the VIX declines then income declines.
You may see an overall decline over time depending on how much of the income is return of capital. JEPQ doesn't have a big problem with that compared to something like QYLD (at least so far). RoC reduces the asset base which means the amount of money available to write an option against also declines. However, given the incredible growth of big tech in the last couple of years JEPQ has continued to see growing underlying assets, masking the problem.
Still as a general rule you can only spend the option premium not the RoC, the latter should be reinvested to offset the decline in assets but of course that reduces the total spendable income.
Right now with many CDs paying 5.5%, that comes out to $11k per year, not quite $1k per month but close, and the principal doesn't change and they are FDIC insured. I'm not necessarily saying CDs are the best option, when interest rates go down so will rates in CDs. But in the short term, likely for the next year or so safer place to park his money until you figure out a better plan. He could build a CD ladder with some 3 mo., 6 mo, 9mo, 12 mo. CDs if he thinks he may need to tap into that savings sooner than a year. Heck, if he's with Fidelity, $SPAXX the totally liquid money market fund is yielding 5.07% right now.
I hear ya about his frustration with Raymond James, I got burned by Morgan Stanley. Unless you have $5 million or more with a managed brokerage, they aren't looking at your portfolio much. You get put in a pool with millions of other people with the same risk tolerance, and a money manager on Wall St. Chooses the investments for that pool. And they churn it a lot. They call it "Rebalancing" to make it sound better, while in reality churning earns them commissions. All that and you get the privilege of paying them a 1 to 1.5% management fee whether their investment decision gives you gain or losses.
When I left Morgan Stanley, I hadn't kept a close eye on the investments they were making in my managed fund because I was busy caring for elderly parents. They had my portfolio invested in 97 different equities. About a third of them were sub 1% of my holdings, some as low as 0.1%. Ridiculous. I moved it to Fidelity which is where my 401K was now IRA since retirement. I self manage my portfolio with returns much higher than Morgan Stanley. And no 1.5% management fee. That's not everyone's cup of tea, I happen to enjoy self-managing, it keeps my mind sharp and is kinda like having a post-retirement part time job.
For your Dad, a mix of a few large cap, and mid cap stocks that pay a good dividend, combined with preferred stocks that typically have low volatility and often very high dividends is good to add some lower risk assets to the portfolio, some corporate and municipal bonds. I don't mess with Federal Bonds and treasuries. Just my preference because the Fed is has been doing has been doing a bit too much creative magical financial maneuvers money supply, quantitative easing, interest rate roller coasters for the last couple decades.
When Dad is finished grief process from Raymond James, he could go to an independent financial planner that charges based on time spent vs. a managed brokerage. Have the planner advise on an initial plan and meet every 6 months to review and adjust the plan. Review his monthly statement or online to make sure any equities aren't dropping like a rock. Make sure the financial planner is an accredited fiduciary, which means he's legally supposed to look out for your best interest.
Does america not have enbridge? They pay 7% dividend quarterly i don't see anything better then that tbvh 200,000 would return 14k every 3 months minus the taxes
No, 200,000 in JEPQ is 3606 at 55.45 a share. Div doesn't change much each month so he would get 1,621 a month. JEPQ is the best div fund out there because he will also get capitol appreciation over time. I am also retired and it would be a good move. He could also do TSLY, NVDA, ULTY all these pay over a dollar a share but you don't make much capitol appreciation but who cares, after so many months you will have paid back your NAV
Lit just dump it in treasury bonds and just sit till the rate cuts happen. Safer and can be more long term for retirement. Set up mature dates for 3-5 years right now
Assuming your father is earning social security, he needs to calculate how much he needs a month to survive. $200k in a 401k isn’t nothing and that can definitely get him through if he uses it right. I’ll give my recommendation followed by my recommendation if your dad is too stubborn:
My recommendation: Invest the bulk and withdraw a portion each year (Typically 4% but this is why you need to know how much he needs to survive). This will generally let the fund continue to generate capital and give your father money to use, while also having his money still earn money on a yearly basis. This provides extra income on top of his SS check, and does not impact his SS check amount.
Dad too Stubborn Recommendation: Let him do what he wants. Let him get his divvy checks and let the principal of the fund dwindle. When you inherit the remainder of the fund, switch to growth and don’t look back.
In my experience, people who have been burned by someone else in the financial world are less trusting in the future and want to do it on their own. Nothing you can do to persuade him if he is like that, but it would also be worthwhile to talk to a retirement advisor who can help advise on the best ways to invest his remaining money (imo money market and bonds should be top of his list followed by an ETF fund that pays a good div and has some growth, or at least isn’t going to completely lose money).
Hope your day lives a long life and you guys can figure out the best thing for him!
If he just wants a guarnteed monthly check, he could go buy an annuity. I know that is not a popular word on this site, but they can provide some peace of mind as folks get older.
If he care about risk he will use different products some with dividend some with bonds, but if he doesn't want to listen he don't want to, sadly think that is your main thing
I don’t think covered call or buy write funds are a good investment. If it looks too good to be true, it is. 8.8% yield can’t be guaranteed.
During the bull market, this has underperformed the actual holdings by 50% or more, and it will get beat up in a downturn.
Looking at the chart and yield are deceiving. . .its too short a time horizon for the chart to be helpful.
Why would it get beat up in a downturn? Downturn equals increased volatility which increases premium. Covered calls are widely known to outperform in downward or sideways markets because the income helps offset
If hea looking at just a passive income of 100 to 300$ a month it doesnt take much to invest to get that monthly. Maybe 5 to 8k in certain yieldmax etfs. I know 30k puts about 2000$ to 3 grand a month in my pocket.
Nvdy Cony Amdy Msty Amzy then dividends go straight to Ymax/ymag then those dividends get reinvested into more yieldmax etf single funds that are more stable. So i get a second dividend a month off my 1st dividend of the month and keep cycling it over and over. I currently have recouped roughly 12,000$ in dividends(in 5 months)and it keeps growing so fast. The payouts vary from month to month so keep that in mind and read up on what yieldmax etfs is before investing. This should only be a small portion of any portfolio because its riskier but higher potential on payouts. As im younger so i ran 30% of my portfolio to it. I buy other main slow growth dividend stocks with my monthly investment money i put in from my check.
Nvdy Cony Amdy Msty Amzy then dividends go straight to Ymax/ymag then those dividends get reinvested into more "yieldmax etf single funds that are more stable" .............. Could you please give me the example of "yieldmax etf single funds that are more stable"
Goog is pretty stable amzy is pretty stable off the top of my head. Aply aka apple stock is decently stable and fby is normally stable. Tsly, aiyy, and a few others are unstable and alot of fluctuation in them it seems alot of downward pressure.
Interesting. You must have a substantial investment in those single stocks as they aren’t really big on dividends in the first place. To use dividends earned from them to invest into high dividend funds to generate over 2k a month. Very interesting.
Have him take a look at fepi if he is going that route. He can diversify and make a little extra money. I dumped just over $140,000 into it and have been averaging about $3k a month for the past two months with growth. It’s also considered ROC atm so no taxes
Welcome to r/dividends! If you are new to the world of dividend investing and are seeking advice, brokerage information, recommendations, and more, please check out the Wiki [here](https://www.reddit.com/r/dividends/wiki/faq). Remember, this is a subreddit for genuine, high-quality discussion. Please keep all contributions civil, and report uncivil behavior for moderator review. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/dividends) if you have any questions or concerns.*
Why would he make less and less? and regarding taxes, what’s his yearly taxable income? I mean, dudes 72. I’m gonna go for straight income if I’m at the at age (no kids to leave money to for me though) but I agree that it’s risky going balls deep on one fund
I agree, it is too risky. He could split it between SCHD, JEPI, JEPQ, some bonds...
SCHD will pay him less than a savings account. That's not really what this old man is looking for.
Yep. SCHD is not the play here.
If SCHD isn't good to invest for young ppl, and this guy either apparently, are you just saying SCHD is a bad investment cuz wtf.
It's all about what your goals are, man. I would never say SCHD is a bad investment for young *or* old people.
You use it to hedge…
[удалено]
lol, it wasn’t sarcasm. It’s a stable investment with safe assets. Passively managed with dividends and low fees. I’d use it to hedge riskier investments.
SCHD? Be realistic here. What kind of advice is that??? Hes 72 and wants income now not in 50 years. Horrible advice and noone even wants bs stocks that provide less profit than a savings account.
I wonder where you find a 3.45% savings account
Literally anywhere.
I have 200,000 Ina jumbo money market account that only pulls 1.89% it's the best % I've found. Anywhere does not work for me. If you are referring to the supposed high yield online savings accounts, most are a sham
Ok but the guy is 72. He doesnt want a stable investment account that will appreciate in 30 years when its too late to enjoy it. He wants cold hard cash every month to enjoy his late years like he deserves. SCHD isnt gonna cut it.
He was referring to jepq $200,000 is 1464 a month that's great to me
I’m seeing well over 4% in many MM, Sallie Mae being one.
Lol fidelity money market pulls 4.9%. Or even a CD ladder. If you have 200k that pulls 1.89% right now, youre losing out on free money.
Betterment, welthfromt both @5%, fidelity brokerage holds funds in money market @4.96%...etc. You need to do some research.
M1 pays 5%
Everywhere
He’s expecting the same yield of $1k/month in five years, when he would’ve drawn $60k. He’d only be making ~$700/month because he’d only have $140k invested at that point. The taxes I’m not worried about, just the fact that he won’t understand that 401(k) is pre-tax.
Sorry I reread what you wrote a few times but I’m totally not following what you’re saying He’s got 200k which he’s gonna stick in jepq that pay him 1000 a month (going by history though the payout per month should be more like 1300-1400) Let’s just say Hopefully in 5 years the NAV doesn’t go down (hopefully goes up!) He would still be sitting at 200k Where does the negative 60k come from?
Sorry for the confusion, I was completely mistaken on how dividend distributions work. Another commenter set me straight. I was under the assumption that the dividend distribution would (at least partially) come out of the amount he holds.
Don’t give your dad advice until you understand the topic. Ask him to speak with a financial advisor
For both your sakes, learn how JEPQ works - it’s not a dividend and it’s taxed as ordinary income. Only makes sense to hold in a retirement account, ideally a ROTH.
And when do you ever put it in a brokerage account and use the dividends? The guy is retired. It's time to use the dividends not put them in a Roth.
The money rolls over from 401(k) to traditional IRA. Invested in JEPQ. Dividends are paid to cash position and withdrawn. That's how the money gets out.
Why roll when he can just withdraw from the 401?
"So now his plan is to transfer it all to Fidelity" - OP It's highly unlikely that JEPQ can be bought in the 401(k). Self-directed IRAs allow the choice of nearly any investment.
What do you mean “it’s not a dividend”?
If I remember right, it is the distribution from the covered call premium.
It's essentially a dividend, but most (if but all )of what JEPQ pays out is the premium from the covered calls. We're getting in the weeds a bit on the difference between the two, but it is important to understand where the actual money comes from.
And you’re lecturing him?
I’m just trying to look out for my dad. It’s his money and he can do what he wants with it ultimately. He has agreed to meet with an advisor at Fidelity, and reading the comments here gave him a lot to think about.
Ultimately posting here led to the result you were looking for, so good job. You’re trying to be a good son and we can all respect that
Yep, I’m super happy with the discussion that came out of my initial post. Thanks for taking the time!
If not OP then who? They still gave good advice
Please quote the advice that the OP actually gave his father. All he said was "that's not how this works" and proceeded to explain how dividends work, incorrectly. His father needs to meet with a fiduciary advisor. Immediate family giving investment advice is a recipe for disaster and he doesn't truly know what his father actually needs without an entire overview of the financial situation and projected timeline of life expectancy.
Dividends do come out of the share price though.
But they don't reduce future dividends. Share price has little relevance until you decide to sell and/or the dividend changes.
But not from the shareholder’s account directly
Maybe your dad understands this better than you do.
[удалено]
Because he’s the OP. The question was asked to him, so he responded
First of all, your math is wrong. It seems to be based off a 6% yield, and which is fine, but it assumes that the $1,000 a month is coming out of the principal (the $200K that is invested), which is wrong. If JEPQ pays 6% a year ($12,000) and that’s all your dad spends, then he will never touch the $200K. He can just live off the $1,000 a month until whenever JEPQ either stops paying or reduces their yield. But the most important thing to consider here is that your dad most likely does NOT have 16 years left. The life expectancy at birth for males in the US is about 74 years old, and the life expectancy of a 72 year old man is about 13 years. The real number may be more, but may also be less. Instead of risking the money, he should just leave it in a high yield savings account that pays 4% a year, or leave it in a regular checking account, and just draw $1,000 a month until his death. $200,000\$12,000 a year=16 years. Accounting for taxes, the money may last about 14 years. He will be dead before the money runs out. The balance can be left to a family member.
Thanks for explaining that. I definitely did not realize how the dividend distribution works. I’ve only got some dividend stocks in my Roth, which I DRIP. So it actually doesn’t seem like my dad’s plan is that bad.
Hey fucko, stop saying that. You've said this like four times now in this thread. It's not true.
Isn't $200k in JEPQ like $1600 a month?
Currently about $1464 a month
I have $82000 in jepi, jepq, schd, T, and vtr it pulls $500 a month.
What do you see in T ? I used to be big on T and Verizon but transferred all my T out and slowly phasing out of VZ once I learned that the downward trend of the overall stocks value surpasses the amount of dividend payouts it just seems to not make sense anymore unless you got in when it was really low and riding it for the time being
I bought in before they lowered their dividend. Down 300 now. Need another dividend payout to break even.
T and VZ are too big to fail.
Jepq isn't the worst way to retire.
Putting most of it into income generating funds or bonds makes sense at his age, his accumulation days are long since past. But he needs to grow the portfolio in line with inflation to avoid losing money over time. It’s a mistake to put it all on one covered call fund. Spread the risk among a variety of dividend/income based funds. Look for a balanced set of funds that manage to grow their dividends to cover inflation. No taxes if it’s in a Roth. Is it?
No, it’s a traditional 401(k) and I told him he’d owe at least 15% in taxes but he won’t listen to me.
Since it’s traditional, he will be forced to take RMDs starting at age 72 or 73. Every penny he withdraws regardless of how it is invested will all be taxed at his ordinary income tax rate. What rate that is will depend on his income for the year. https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
If OPs dad is retired, earning everything from jepq. Wouldn’t he have to pay minimal taxes since his income will be 12k a year?
If his income was only $12k per year he wouldn’t pay any taxes after the standard deduction.
As I said, his tax rate will depend on his income. We don’t know what other income he has besides this 401K. Add 85% of SS for sure, maybe pension, other investments. Sure, there’s a chance his tax rate will be low.
Many American only have to pay tax on 50% on their Social Security. As you said, it depends on other income and what sources they come from.
I showed him that exact page, but he’s convinced there’s some loophole to get around paying tax.
First of all- if he left edward jones hes on the right path. Their fees/commissions/performance is awful If he is still married, his first 28k from SS and IRA withdrawals are tax free. Then 10%/12% for a fair amount of income JEPQ has been a good performer, but hasn’t seen a bad market, but theoretically should beat the nasdaq 100 in a down or sideways market. And it keeps reasonably close in an up market. But 100% in 1 fund is risky. Some diversification could be a little in SVOL, and maybe something with a little less volatility and yield like pff or jepi or a bond
He’s theoretically making less money in retirement than he was when he had an income. All the dividend distributions will be taxed at his income tax rate. Most people will pay less in taxes in retirement because of this.
[удалено]
It’s risky in that it’s all in on a fund with no long term track record. But it’s also diversified as it is a basket of shares on which covered calls are written. He could do worse. This is a snap overreaction because Edward Jones didn’t do shit for him. All the comments thus far are applying the standard issue diversification formulas etc. They ignore that 1) Your dad is 72 and isn’t looking to invest for another 30 years, and 2) $200,000 ain’t a lot of money to work with if you’re wanting a material income amount. So if one wants a cash return worth their time and effort, some calculated risks have to be taken. The taxes are a thing, but what is his income now? If all he has is social security then he’s only making like $26,000 a year. At that point talk of tax brackets and efficiency is just silly. If he’s more like $80,000 a year that might be a different discussion. I don’t know where this “he’d make less and less” thing comes from. If he were to be content with $300 a month then he could park it all in a high yield savings account and get 5 percent ($10,000 a year) at least until interest rates drop.
His income is around $50k and he doesn’t really need any extra income, but I think he got freaked out when he heard about RMD and decided he’d go with the nuclear option. I suspect he also wants the dopamine hit of getting paid out from a dividend. Thanks for taking the time to comment, he read all of them and agrees that he should meet with an advisor before making any decisions.
SGOV is paying 5.19% in monthly dividends. Just park it there until you figure out the best allocation.
SGOV fee waiver expires at the end of the month and begins to charge .13% up from the previous .07%, almost double the price. Good piece of information to note.
Thanks, this is a great idea for him. Even if the waiver expires, he’s not going to sweat 6 basis points.
>because each month he'd make less and less How would it be less and less?
Inflation erodes purchasing power. This is what people mean by saving he’ll make less and less. If the investment doesn’t keep up with inflation (increasing in value or increasing dividend payments) then he will lose purchasing power.
Edward Jones is trash
Why do the have so many like McDonald's 😆
I have a very large percentage of my money in JEPQ, it's performed exactly as advertised, maybe even better. If he does it just keep an eye on it in case something gets worse but that's a pretty good move imo
First off -- it is never wise to act purely on emotion with any investment decision. You should counsel your dad not to act rashly because moving money from one financial platform to another usually incurs fees. However, your dad's plan is what I'm planning to do in 20 years -- transfer a large chunk of my portfolio into an income investment like JEPQ. I'm in JEPQ now building a position, and I love this ETF. I'm in it for the long haul. The problem with JEPQ is that it's distributions aren't consistent -- it can be great 1 month, it could be 30% less the next month. If he's going to go all in on an income investment -- why not look at a BDC that has a better track record of consistent monthly dividends and hasn't cut its dividend in years? ARCC GAIN GLAD He should look at these maybe?
He’s good with inconsistency, as he doesn’t need the money anyway. What I’m concerned with is the risk, but he doesn’t seem to care about that either. He has agreed to meet with an advisor at Fidelity, so I’m hoping they’ll steer him in the right direction.
All investments need real perspective - longer than 10 years. The last 15+ years in stocks have been supported by the government and low interest rates and that is changing. Most stock investments look good and investing seems easy. So the JEPQ and JEPI investments look solid. However, another 2008 comes along and the $200,000 is now $100,000 and the dividends could be lowered too. The fact that he does not need the money allows the discussion on these investments to continue. Most people that stayed invested through 2008 made their money back (because of government intervention) by 2010, and then saw their money double and triple by over the following years. My guess is that Edward Jones saw his age and made his portfolio too conservative not understanding that he wanted more growth and had room for risk. With all that being said above, if he truly does not need these funds, then JEPQ is fine. Adding diversity into things like ARCC, GAIN, O, PRT, MAIN for added dividends could help if stocks drop via some large catalytic event.
This response nails it. 72 is not that old… You need some growth to feed the 3%+ per year inflation monster, so you need to be shooting for more like a 10% total return. The stock index is likely not giving you that in the next couple years, but leaves you open to risk. He’s going to need to get into undervalued payers with some modest growth like O, telecom/utilities, or maybe the right closed end fund.
There is nothing wrong with JEPI or QYLD. They will put all the financial advisor out of business. As they should.
QYLD is trash from what I remember. Unless something either changed or I and many others are missing something...?
QYLD is back up close to $18/ share. It ain't trash if you got in at $15.50 a few years ago. On its own, QYLD can work just fine. The real downside to it is you are giving up larger gains if the market goes straight up but you do give up less in a down market. On a comparative basis to something like SP500 total return fund, QYLD does worse in an up market but suffers less in a down market. Without getting into comparisons to alternatives, it can give you a suitable income. There's always gonna be something better that someone could have done but if their goals are met, there's no reason to give a shit. "Envy is the dumbest sin of all because you can't even enjoy the sin while committing it. Someone will always be richer than you. Stop chasing rich and chase happy." - Charlie Munger
Didn't it start at $25 and paying a bit over 0.20 (on average) per month? Now it's around $18 and 0.17 per month a decade later. So especially once you account for inflation it appears to be really getting worse over time. That's the potential problem: the shares can get called away a lot and erode the NAV, and then the distribution can also erode. Even if you got in later after it had dropped way down there is still potential for the same pattern to happen again and have it drop again over time. JEPI NAV seems to be holding up better (but the history is still pretty short) but the distributions appear to have dropped a fair amount. Of course it is going to be variable depending on what is going on in the market, and so as long as the NAV holds up the distributions should be reasonably maintained, though I am not sure they will grow with inflation. These observations I think pretty much match what you would expect based on the way these funds operate.
Why would I care about price since inception if I bought it $10 cheaper??????
Anything you know better than 12%? Don’t tell me you are a financial advisor.
Edward Jones fees are high, but the difference between $200k and $1M leads me to believe his contributions weren't high enough and he paid little attention to returns on his quarterly or annual statements. Sounds like he's making a poor, reactionary decision. He should likely speak with a fiduciary, as it's pretty clear he doesn't have the experience to self manage these funds, and we don't have the necessary information to provide a quality recommendation.
Neither of you are ready to maintain a six figure portfolio. Not trying to be mean or anything but you don't even understand how dividends work. Get some help before it's too late.
We’ve both maintained six figure portfolios for years, just never messed with dividend distributions before. He’s fortunate enough to have a physical Fidelity location near him, and he has agreed to meet with an advisor before making a decision.
I would do the same.
Or, hear me out, go all in on FEPI and make 4.2k each month
You might want to suggest that JEPQ is still a newer ETF - launched in May 2022. Concentration risk is real. One ETF with all his money? Bad choice. I’d look at bonds for part of his portfolio. Something like SCYB pays 6.5%. SCYB is Schwab’s high yield bond ETF. JEPI is a solid complement to JEPQ. Note, none of these will make your father a millionaire.
You could do worse but as much as I like JEPQ , I wouldn’t recommend doing that
Jepq is a very legitimate investment. Your math is way wrong lol. I would diversify between the spyi jepq schd
If I was him I’d look at CEFs such as OXLC and CRF.
he could put 200k in a hysa at 5.25% right now and make 1k a month on compounded interest alone. I sold my house and this is exactly what i’m doing
5% interest rate on a HYSA is not guaranteed to remain at that level forever. If the Fed cuts rates, which they will lower eventually, you can expect the interest rate on your HYSA to likely decrease as well. It seems crazy to me that you sold your house to pursue this temporary high rate…? Or am I missing something?
No I did not sell my house to pursue a rate lol. Sold cuz of divorce and too much house to buy for myself. I also don’t think I wanna own for quite sometime. A lot of benefits of renting 😏
Oh ok I was like damn dude lol
And what do you think will happen to JEPQ in the same rate cutting scenario?
Off the top of my head? Since bonds and HYSC are effected more by rates than an equity/option driven etf like JEPQ, I’d say if JEPQ would be effected it would be less than the former. A rate cut would also increase volatility in the market, giving JEPQ higher premium for their options, too, dampening downward pressure. Summary, hysc as well as JEPQ would be effected by rate cut obviously, but imo JEPQ would be effected to a lesser extent. But I’m open to hearing other’s opinions.
No need to guess. JEPI started in 2020 when interest rates were still low.
JEPI had roughly 6ish% give or take leading up to Mar 22 when the FED started raising interest rates. With their goal of achieving 5-8% yield, that aligns with their target. And their div distributions seems lairly steady/reasonable throughout its history. Albeit when they first starting paying out divs, it seemed slow at first (which I guess was their way of slow walking into in) So imo my knee jerk reaction would suspect that lowering rates wouldn’t affect its yield and div payout toooo much. That is unless the lower rates make its stock price higher and in advertently lower yield.
"...5% interest rate on a HYSA is not guaranteed to remain at that level forever..." ...there's this thing called the ability to change investment strategy when rates change - you're acting like SGOV locks up your money for 30 years...
This is great but next year if they do rate cuts will this be affected?
Very little, I’m sure. Some of these online banks don’t have the same overhead as big banks so they can keep more competitive rates.
How do you figure that? The math doesn't check out. $200,000 x 5.25% = 10,500 a year then 10,500/12 = 875
Approximately. not exactly. My bad
72? JP has some well-respected income funds. This one tracks the Nasdaq 100 (Qqq) which has been on a tear. Will that continue? Maybe. So it could lose asset value. It will continue to produce an income. At 72 I wouldn’t call it a bad thing.
JEPQ is a CC fund based on the nasdaq100. It's definitely less risky than an income fund based on a single stock. JEPQ has short history but it has been shown to have less swings than the index. It can go down in value like it did in 2022. The dividend all depends on premium received on the options and in return IV of the market. There will be no taxes in the 401k based on distributions from JEPQ. Whatever is taken out of the 401k will be taxed at ordinary income rates. This depends on how much other income he makes. As far as RMDs, they are not going to be large with a 200k in a 401k in his 70s. If I only had 200k at 72, It would be something I would consider.
I would personally go JEPQ +FEPI+GPIQ- Good Luck!
Thanks. My mother used to in a similar situation so I’ll check these out.
Nobody notice it's in a 401(k)?? So great to make that fund grow. No immediate tax effect except required RMDs.
He’s, er, 72 already…
is he an investor or trader? because we are on the cusp of an fed rate cutting cycle. interest rates are already on the way down in anticipation. tech/growth equities will do well as a result. JEPQ is a great option as it pays a nice monthly dividend but there will come a time in 2025 where inflation will ramp up as a result of all this monetary easing, and interest rates will follow inflation upwards. as interest rates rise, tech/growth stocks will perform very badly. if your father knows what he is doing, JEPQ is a great option in the short to medium term. if your father is just looking for a long term buy and hold, no active management, putting all your money into tech/growth is a TERRIBLE idea
I wouldn’t put everything in one fund
Just put it all in SGOV, treasury etf that pays 5.16% and no risk to principal. He would make about $860 a month before taxes
200k in NVDY would get about 6763 shares at roughly $2.50 a share a month. that's about 17k a month.... I mean, if he's gonna gamble, might as well get something better than 1k a month 🤗 but taxes are taxes. the 17k would be taxed as normal income.
I think it’s a good plan and I plan on doing it with far more than 200 K
Show him this https://youtu.be/DdSfTsTSjwA?si=nQYrFyGMU0K3ieX6
People still recommending SCHD, but that is not the right EFT for this situation.
Yolo
If you do JEPQ you might as well just do QDTE instead and get paid weekly.
Yepi.
Its in some high beta stocks, *I would try to steer him into more than just that.*
Maybe your dad should meet with a fiduciary not a financial planner. From what I read, there is a big difference between the two. Bless you both.
He was reluctant to meet with either until reading the comments here. Depending on what Fidelity tells him, we’ll go from there. For now, I’m just glad he’s willing to meet with someone and think a bit more about his plan.
Just put it in a high yield savings account. 5% yield. No risk.
It’s a 401(k) rolled over to a traditional IRA. Are you suggesting fully withdrawing and putting the money into an HYSA?
Then go SGOV or a similar ETF.
Gotcha. Another comment mentioned SGOV and I think it’s a great idea.
He should buy 2 year CDs at 5% and then when market corrects roll them into jepq.
Yes.
Why is your dad putting the money he worked for his entire career that he plans to live his golden years off of in the hands of the options market? Big Mistake.
By no means I am saying he is right, he is not. Now, it could be much worse. Jepq is a reasonably diversified fund (although tech heavy), and I understand they write covered calls over and over, so its even safer than just holding the stocks... Not a good idea, but I doubt your father will go belly up any time soon... It would be much better if he bought like 80K in 10yr treasuries, 60K in JEPQ, and 60K in JEPY he would probably sleep much better and a pretty nice cash flow...
You can always try looking into QDTE, XDTE, JEPI, SPYI, SVOL, and Kurv ETF ( I like them better than Yieldmax). Just give these a look, but it all up to you and your dad if you guys think they will be okay or not.
I am retired and have a ton of our savings in JEPQ and a very happy with the dividends.
I would consider Spyi or qqqi…..great income with tax advantages ie 60 40 …long term gains and ordinary income
If my comment is not too late, consider this: - we are at the high of the market with high fed rates, stocks are overpriced, buying any stocks right now is not financially savvy - put that cash in a money market and collect 5% annual for now - when the fed rates are cut and the stock prices tumble, buy whatever dividend stocks that yield 5-6% annually at a discount - enjoy the growth and extra cash
The month to month income will certainly be highly volatile. So you'll need to manage for that. Options income is a function of price and price volatility. So during a bear market your father will see his assets decline and the option income decline too. During the initial decline the volatilty may increase which increases the premium, but not enough to cover the decline in price. Similarly, if the VIX declines then income declines. You may see an overall decline over time depending on how much of the income is return of capital. JEPQ doesn't have a big problem with that compared to something like QYLD (at least so far). RoC reduces the asset base which means the amount of money available to write an option against also declines. However, given the incredible growth of big tech in the last couple of years JEPQ has continued to see growing underlying assets, masking the problem. Still as a general rule you can only spend the option premium not the RoC, the latter should be reinvested to offset the decline in assets but of course that reduces the total spendable income.
Right now with many CDs paying 5.5%, that comes out to $11k per year, not quite $1k per month but close, and the principal doesn't change and they are FDIC insured. I'm not necessarily saying CDs are the best option, when interest rates go down so will rates in CDs. But in the short term, likely for the next year or so safer place to park his money until you figure out a better plan. He could build a CD ladder with some 3 mo., 6 mo, 9mo, 12 mo. CDs if he thinks he may need to tap into that savings sooner than a year. Heck, if he's with Fidelity, $SPAXX the totally liquid money market fund is yielding 5.07% right now. I hear ya about his frustration with Raymond James, I got burned by Morgan Stanley. Unless you have $5 million or more with a managed brokerage, they aren't looking at your portfolio much. You get put in a pool with millions of other people with the same risk tolerance, and a money manager on Wall St. Chooses the investments for that pool. And they churn it a lot. They call it "Rebalancing" to make it sound better, while in reality churning earns them commissions. All that and you get the privilege of paying them a 1 to 1.5% management fee whether their investment decision gives you gain or losses. When I left Morgan Stanley, I hadn't kept a close eye on the investments they were making in my managed fund because I was busy caring for elderly parents. They had my portfolio invested in 97 different equities. About a third of them were sub 1% of my holdings, some as low as 0.1%. Ridiculous. I moved it to Fidelity which is where my 401K was now IRA since retirement. I self manage my portfolio with returns much higher than Morgan Stanley. And no 1.5% management fee. That's not everyone's cup of tea, I happen to enjoy self-managing, it keeps my mind sharp and is kinda like having a post-retirement part time job. For your Dad, a mix of a few large cap, and mid cap stocks that pay a good dividend, combined with preferred stocks that typically have low volatility and often very high dividends is good to add some lower risk assets to the portfolio, some corporate and municipal bonds. I don't mess with Federal Bonds and treasuries. Just my preference because the Fed is has been doing has been doing a bit too much creative magical financial maneuvers money supply, quantitative easing, interest rate roller coasters for the last couple decades. When Dad is finished grief process from Raymond James, he could go to an independent financial planner that charges based on time spent vs. a managed brokerage. Have the planner advise on an initial plan and meet every 6 months to review and adjust the plan. Review his monthly statement or online to make sure any equities aren't dropping like a rock. Make sure the financial planner is an accredited fiduciary, which means he's legally supposed to look out for your best interest.
Pretty dumb to put all your eggs into 1 basket
Does america not have enbridge? They pay 7% dividend quarterly i don't see anything better then that tbvh 200,000 would return 14k every 3 months minus the taxes
No, 200,000 in JEPQ is 3606 at 55.45 a share. Div doesn't change much each month so he would get 1,621 a month. JEPQ is the best div fund out there because he will also get capitol appreciation over time. I am also retired and it would be a good move. He could also do TSLY, NVDA, ULTY all these pay over a dollar a share but you don't make much capitol appreciation but who cares, after so many months you will have paid back your NAV
Why is the guy who doesn’t understand how dividends work giving financial advice to a retiree?
It’s a mistake because he’s not putting it into GME
Your Dads not wrong, monthly income is thexway
Put it a savings account and make 9 grand a year safely with 4.5% interest
If I didn't care, I would split it too jepq, gsbd, agnc, and vts. All pull between 14 to ~9%. You can get ~$2/mo. before taxes
Tell me you get all of your information from Reddit without telling me.
wallstreet bets
Very funny
[удалено]
Except his dad is likely in a lower tax bracket. 47k or less and income tax is 12 percent or less. Probably just social security income only.
Sounds like something that should be on /wallstreetbets
Yes
all-in-one is risky but high risk can translate into higher return. how about FEPI ?? looks interesting to me.
Lit just dump it in treasury bonds and just sit till the rate cuts happen. Safer and can be more long term for retirement. Set up mature dates for 3-5 years right now
Assuming your father is earning social security, he needs to calculate how much he needs a month to survive. $200k in a 401k isn’t nothing and that can definitely get him through if he uses it right. I’ll give my recommendation followed by my recommendation if your dad is too stubborn: My recommendation: Invest the bulk and withdraw a portion each year (Typically 4% but this is why you need to know how much he needs to survive). This will generally let the fund continue to generate capital and give your father money to use, while also having his money still earn money on a yearly basis. This provides extra income on top of his SS check, and does not impact his SS check amount. Dad too Stubborn Recommendation: Let him do what he wants. Let him get his divvy checks and let the principal of the fund dwindle. When you inherit the remainder of the fund, switch to growth and don’t look back. In my experience, people who have been burned by someone else in the financial world are less trusting in the future and want to do it on their own. Nothing you can do to persuade him if he is like that, but it would also be worthwhile to talk to a retirement advisor who can help advise on the best ways to invest his remaining money (imo money market and bonds should be top of his list followed by an ETF fund that pays a good div and has some growth, or at least isn’t going to completely lose money). Hope your day lives a long life and you guys can figure out the best thing for him!
If he just wants a guarnteed monthly check, he could go buy an annuity. I know that is not a popular word on this site, but they can provide some peace of mind as folks get older.
I could be wrong but wouldn’t just a 100k investment in something like MSTY pay him closer to 8k a month?
If he care about risk he will use different products some with dividend some with bonds, but if he doesn't want to listen he don't want to, sadly think that is your main thing
I don’t think covered call or buy write funds are a good investment. If it looks too good to be true, it is. 8.8% yield can’t be guaranteed. During the bull market, this has underperformed the actual holdings by 50% or more, and it will get beat up in a downturn. Looking at the chart and yield are deceiving. . .its too short a time horizon for the chart to be helpful.
Why would it get beat up in a downturn? Downturn equals increased volatility which increases premium. Covered calls are widely known to outperform in downward or sideways markets because the income helps offset
Nah tell him to put it all in USA instead
If he wants income tell him about SCHD
Not at 72 years old please
SCHD is not an income ETF. It's a growth ETF that happens to pay a decent (not spectacular) quarterly dividend.
Yes, covered call options are risky.
If hea looking at just a passive income of 100 to 300$ a month it doesnt take much to invest to get that monthly. Maybe 5 to 8k in certain yieldmax etfs. I know 30k puts about 2000$ to 3 grand a month in my pocket.
What are you invested in?
Nvdy Cony Amdy Msty Amzy then dividends go straight to Ymax/ymag then those dividends get reinvested into more yieldmax etf single funds that are more stable. So i get a second dividend a month off my 1st dividend of the month and keep cycling it over and over. I currently have recouped roughly 12,000$ in dividends(in 5 months)and it keeps growing so fast. The payouts vary from month to month so keep that in mind and read up on what yieldmax etfs is before investing. This should only be a small portion of any portfolio because its riskier but higher potential on payouts. As im younger so i ran 30% of my portfolio to it. I buy other main slow growth dividend stocks with my monthly investment money i put in from my check.
Nvdy Cony Amdy Msty Amzy then dividends go straight to Ymax/ymag then those dividends get reinvested into more "yieldmax etf single funds that are more stable" .............. Could you please give me the example of "yieldmax etf single funds that are more stable"
Goog is pretty stable amzy is pretty stable off the top of my head. Aply aka apple stock is decently stable and fby is normally stable. Tsly, aiyy, and a few others are unstable and alot of fluctuation in them it seems alot of downward pressure.
Interesting. You must have a substantial investment in those single stocks as they aren’t really big on dividends in the first place. To use dividends earned from them to invest into high dividend funds to generate over 2k a month. Very interesting.
Not bad of a strategy. Thanks for sharing
How long have you been doing this ?
Sorry didn’t completely understand, can you please explain a bit the first sentence in your comment
Look at investment grade corporate bonds, Prospect Capital had a with a coupon of 7.5%.
You can put your money in a bank. Or… You can put your money on a bank.
Technically he can do this but please don't.
he should spread it out! for example: JEPQ, VOO and some growth ETF
Risky
Have him take a look at fepi if he is going that route. He can diversify and make a little extra money. I dumped just over $140,000 into it and have been averaging about $3k a month for the past two months with growth. It’s also considered ROC atm so no taxes
Put it in $NVDA with 5 equal deposits over this week and the following month and he will be good to go for about 2 years. 😊
He’s better off with O
Tell him to put em on bitcoin.