These 3 ETFs Pay 6.29% to 11.80%. Spending That Income Isn’t a Way Around the 4 Percent Rule
High-yield ETFs paying up to nearly 12% look like a shortcut past the 4% rule, but that logic rests on a confusion between two measurements that retirement researchers say can determine whether a portfolio survives 30 years.
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Three popular monthly-paying income funds, the NEOS S&P 500 High Income ETF (CBOE:SPYI), the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) and the Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO), had trailing distribution yields between 6.3% and 11.8% on October 20, 2026. Many retirees look at numbers like these and decide they can spend the payout and leave the 4% rule behind. That belief confuses two different measurements, and the gap between them can decide whether a portfolio lasts 30 years.
Where the 4% Rule Came From and Why It Still Works
Wes Moss’s book The Retire Sooner Method traces the rule to financial advisor William Bengen’s 1994 research. Bengen studied market data back to the Great Depression and found that retirees who took 4% of their starting portfolio in year one, then raised that dollar amount for inflation each year, “almost never ran out of money over a thirty-year retirement” as long as they kept a reasonable stock and bond mix.
The rule has held up. Capital Investment Advisors’ Moss reports Bengen raised his safe maximum withdrawal rate to 4.7%, and Moss describes the target as “a range, a dynamic or even elastic withdrawal target zone.” The benchmark has moved up modestly. That said, it sits far below 8% or 12%.
Your Fund’s Payout Is a Withdrawal by Another Name
A distribution yield describes what a fund paid over the past 12 months relative to its share price. It looks back and describes the fund. A safe withdrawal rate describes how much you can pull from your whole portfolio each year without running out of money. It looks forward and describes your plan.
Spending a distribution is a withdrawal, whatever the brokerage statement calls it. A retiree who spends every SPYI payout is taking roughly 11.8% out of that position each year.
Return of capital (ROC) sharpens the point. When a fund classifies part of a distribution as ROC, it is handing back a portion of your own invested money. ROC lowers your cost basis and can defer taxes in a taxable account, but spending it reduces principal just as selling shares would. Amplify’s DIVO page states that distributions may include return of capital. These funds’ payouts change in tax character from year to year, so check each fund’s Form 19a-1 notices and year-end tax documents.
History Punishes Retirees Who Start Above 4%
The book includes a table of 30-year success rates by starting withdrawal rate and stock/bond mix. At an 8% initial withdrawal, Capital Investment Advisors found success rates ranging from 7% to 53% depending on the mix.
At a 4% start, the same table shows success rates from 83% to 100%. Two of the yields on this list sit near or above that 8% threshold. Spending them in full puts a retiree on the side of the table where money ran out at least as often as it lasted.
SPYI Pays 11.8% by Selling S&P 500 Upside
SPYI holds the stocks of the S&P 500 and, according to NEOS, runs a call option strategy that may include both sold and purchased SPX index options. Buying some calls back leaves room for partial upside, and index options qualify as Section 1256 contracts with blended 60/40 long-term and short-term tax treatment. The portfolio is broad, with Apple at about 7% of assets in the latest filing.
Results have been strong, with a 16% one-year total return and 79% over five years, a window covering its whole life since a 2022 launch.
Look at the share price, though. It closed October 2025 near $53 and trades around $54 now. Nearly the entire gain arrived as cash, so a retiree spending all of it ends with a position that has not grown while living costs keep rising.
JEPI’s 8% Yield Comes With a Shrinking Share Price
JPMorgan describes JEPI as a defensive, actively managed stock portfolio coupled with equity-linked notes that sell out-of-the-money S&P 500 Index call options. The notes convert option premium into monthly income at a 0.35% expense ratio. The yield is approximately 8.0%, with total returns of 9% over one year and 43% over five.
JEPI closed October 2021 near $62 and now sits around $57, roughly 7% lower.
Monthly payouts also swing, from $0.45 in May 2026 to $0.34 in October. Income that changes this much cannot ground a fixed spending budget.
DIVO Keeps the Most Upside by Writing Fewer Calls
DIVO has the lowest yield, and that is its edge. It holds 20-25 large-cap dividend growers, led by Caterpillar, Apple, and Microsoft, and writes covered call options on individual stocks on a tactical basis. Because calls cover only selected names, more of the upside stays with shareholders.
The share price rose from about $37 at the end of October 2021 to roughly $48, while total returns reached 16% over one year and 69% over five.
The 6.3% trailing yield is inflated by a December 2025 payout near $0.95. Amplify puts its own normalized distribution at 4.9%. The trade-offs are a 0.56% expense ratio and a concentrated portfolio.
How Income Funds Fit Inside a Plan That Lasts
These funds can play a useful role when you treat their payouts as one cash source counted against a total withdrawal budget in Bengen’s 4% to 4.7% range. Any distributions above that budget get reinvested or parked in a cash reserve for weaker years. We made the full case for an income-first replacement to the old rule in a free report on why the 4% rule wobbles today.
Their natural place is the stock allocation alongside bonds and cash. They beat the 5.1% 10-year Treasury yield on paper, but they have full stock-market risk. Account placement matters too: SPYI’s Section 1256 structure helps most in taxable accounts, while JEPI’s note income fits better inside an IRA.
Matching Each Fund to the Retiree It Serves Best
DIVO’s design favors dividend quality and long-term growth, and its share price history shows it. SPYI offers broad S&P 500 exposure with tax treatment that helps in taxable accounts, alongside a flat share price. JEPI aims for a smoother ride, and its share price has fallen. All three come with the same rule: spend no more than your withdrawal plan allows, no matter how much the fund pays.
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Ryne Mauck is an investment writer covering exchange-traded funds, retirement planning, and portfolio strategy. Through his work at 24/7 Wall St. and other investment platforms, including Seeking Alpha, he aims to provide clear, research-driven insights that help investors make more informed decisions while maintaining a long-term approach to investing.
Ryne holds a B.Sc. in Finance and an M.A. in Political Science. He is a formerly registered Municipal Advisor Representative and has passed the Series 50, Series 63, and Series 65 exams. His articles are not intended to be, nor should they be interpreted as, financial advice.
