How a 66-Year-Old Built a Monthly Income of $4,600 with Just Two Funds
Generating $4,600 each month translates to an annual income of around $55,200, which can provide a comfortable middle-class retirement, especially after Social Security benefits. For a 66-year-old investor using a combination of two well-known funds, the key consideration is which yield tier to depend on, and balancing growth, stability, and peace of mind.
The funds in play here are the Schwab U.S. Dividend Stock ETF (NYSEARCA:SCHD) and the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI). One focuses on dividend growth, while the other emphasizes current cash flow. Together, they offer a comprehensive approach to retirement income.
Current Yields Overview
SCHD is expected to deliver $1.048 per share over the next year, with a stock price hovering around $34, leading to a yield close to 3%. The fund is heavily invested in firms like Qualcomm, Texas Instruments, and UnitedHealth Group, and it includes over 100 companies that pay dividends, primarily in healthcare, consumer staples, and energy.
On the other hand, JEPI projects a payout of $4.58 per share for the upcoming year with a stock price near $58, resulting in a yield of nearly 8%. With an expense ratio of 0.35%, it’s quite reasonable for an actively managed covered call strategy. Its top holdings mirror popular S&P 500 stocks, including Broadcom, Amazon, Apple, Alphabet, and NVIDIA.
For reference, the yield on a 10-year Treasury bond is currently about 4.7%, acting as a risk-free benchmark that other income options must compete against.
Three Paths to Achieving $4,600 Monthly
Starting with a conservative strategy, yields fall between 3% and 4%. This is where SCHD fits in. If you’re looking at dividends from solid blue-chip companies and quality indexes, a 3.5% yield means you would need around $1.6 million to replace that $55,200 annual income. This route is often seen as a safer choice, with SCHD showing a remarkable 236% return over the past decade, indicating potential for growth.
For those leaning towards a medium-risk tier, yields range from 5% to 7%. This includes REITs, preferred stock funds, and high-dividend stocks, with products like JEPI adding some growth potential. Aiming for a 6% yield would require about $920,000—similar to a previously modeled $850,000 portfolio aimed at generating $4,612 monthly for a retired couple.
The aggressive tier, yielding between 8% and 14%, features JEPI on the lower end. This category also includes business development companies and mortgage REITs. With an 8% yield, you might only need around $690,000; at 12%, that drops to about $460,000. However, it’s worth noting that these high dividends can decline over time, and there’s a risk that share prices could dip by the time those checks are issued.
Challenges for Retirees
From 2011 to 2026, SCHD’s quarterly dividends saw a rise from around $0.12 to $0.25 per share, reflecting a steady, quiet growth strategy. Meanwhile, JEPI’s monthly payouts fluctuate due to market volatility, such as the August 2026 payment dropping to $0.37 from $0.45 in May of the same year. While JEPI’s return over five years was 43%, SCHD outperformed it. This trade-off between stable growth and volatility is often discussed by financial planners.
Interestingly, a 3% yield that grows at 8% annually can double your income in about nine years. However, the 8% yield isn’t guaranteed to remain consistent—it may decrease. This suggests that a mix of SCHD’s growth-oriented approach and JEPI’s focus on current income could be more sustainable than relying solely on a high-yield strategy. With core PCE inflation continuing to rise, staying ahead is crucial.
Three Steps to Consider Before Investing
- Align your spending against the objective of $4,600 per month. After accounting for Social Security and any pensions, retirees usually need less than their previous incomes. It’s essential to evaluate monthly expenses before adjusting your portfolio.
- Consider placing JEPI in an IRA due to its ordinary income tax implications, while keeping SCHD in a taxable account, as it mainly earns qualified dividends that have favorable capital gains tax rates.
- Review the 10-year total returns of both funds side by side. The contrast between SCHD’s impressive 31% one-year return and JEPI’s 11% return highlights potential growth and income disparities. It’s wise to simulate your own investment blends before committing funds.
