At age 67, retirement planning enters a different phase. Te focus shifts toward generating reliable cash flow while managing taxes and preparing for Required Minimum Distributions (RMDs), which currently begin at age 73. Once RMDs start, the IRS determines the minimum amount that must be withdrawn from a Traditional IRA each year, whether you need the money or not.
Different income strategies generate cash in different ways, and understanding those mechanics can make building a retirement portfolio in a Traditional IRA much simpler. Generating $5,000 per month requires approximately $60,000 of annual income, or a blended portfolio yield of roughly 6% on a $1 million portfolio. Here’s one way to get there using three income ETFs.
JPMorgan Equity Premium Income ETF (JEPI) – 50%
The highly popular JPMorgan Equity Premium Income ETF (JEPI) forms the foundation of the portfolio with a 50% allocation.
JEPI combines an actively managed portfolio of lower-volatility U.S. large-cap stocks with an allocation of roughly 15% to equity-linked notes that replicate the payoff of a one-month out-of-the-money covered call strategy on the S&P 500. The result is a strategy designed to generate substantial monthly income while reducing overall volatility compared with the broader equity market.
The fund currently carries a 0.35% expense ratio and offers approximately a 9.40% annualized distribution rate based on its most recent monthly distribution. Because this portfolio is being held inside a Traditional IRA, the ordinary income nature of JEPI’s ELN distributions is far less of a concern than it would be inside a taxable brokerage account.
A 50% allocation, or $500,000, would currently generate approximately $47,000 annually, or about $3,917 per month, before taxes and future changes in distributions.
Schwab U.S. Dividend Equity ETF (SCHD) – 20%
The Schwab U.S. Dividend Equity ETF (SCHD) provides exposure to high-quality dividend-paying companies, and does not use any options overlays.
The fund tracks the Dow Jones U.S. Dividend 100 Index, selecting companies with at least 10 consecutive years of dividend payments before screening them using factors such as free cash flow to debt, return on equity, dividend yield, and dividend growth.
SCHD currently charges just a 0.06% expense ratio while producing a 3.33% 30-day SEC yield. More importantly, it adds long-term dividend growth and capital appreciation potential alongside current income.
With a 20% allocation, or $200,000, SCHD would currently generate approximately $6,660 annually, or roughly $555 per month (keep in mind SCHD pays quarterly).
Virtus InfraCap U.S. Preferred Stock ETF (PFFA) – 30%
The Virtus InfraCap U.S. Preferred Stock ETF (PFFA) rounds out the portfolio with additional income that doesn’t rely on common equities.
Unlike passive preferred stock ETFs, PFFA is actively managed, allowing managers to avoid preferred securities with unattractive yield-to-call characteristics. The fund can also employ moderate 20-30% leverage to enhance income. The trade-off is higher costs, with a total expense ratio of approximately 2.11%, but investors are compensated with 8.67% 30-day SEC yield.
A 30% allocation, or $300,000, would currently generate approximately $26,010 annually, or around $2,168 per month.
Putting It Together
Using the current distribution rates, this allocation would generate approximately $79,670 annually, or roughly $6,639 per month pre-tax, comfortably exceeding the $60,000 annual income target. That provides a cushion for taxes, if distributions fluctuate over tim,e or if a portion of the income is reinvested.
Because all withdrawals from a Traditional IRA are generally taxed as ordinary income anyway, there is little benefit to avoiding JEPI’s ELN distributions inside this account. Instead, the emphasis should be on building a diversified income stream while managing overall portfolio risk.
Annual rebalancing helps maintain your target allocations before Required Minimum Distributions begin at age 73 while avoiding unnecessary trading and emotional decision-making. Once RMDs arrive, those required withdrawals themselves can often serve as part of your natural rebalancing process.
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