A $1.6 Million Portfolio That Quietly Pays a Couple $9,000 a Month and Stays Below the IRMAA Tier 1 Threshold

A 64-year-old couple with a $1.6 million taxable investment portfolio faces a precise retirement-income problem: generating $9,000 per month, or $108,000 annually, while keeping modified adjusted gross income under the 2026 IRMAA Tier 1 threshold of $218,000 for married couples filing jointly. Cross that line by even one dollar and Medicare Part B and Part D surcharges kick in for both spouses. Each person’s monthly Part B premium rises from the standard $202.90 to $284.10, while Part D adds another $14.50 per person per month on top of existing plan premiums. For a couple where both spouses are on Medicare, that single dollar of excess MAGI costs an extra $2,297 per year in combined surcharges. Hitting the income target also requires the portfolio to produce a blended distribution rate of approximately 6.8%, calculated by dividing the $108,000 annual goal by the $1.6 million base.

That target yield sits well above what lower-risk alternatives currently offer. The 10-year Treasury is yielding around 4.7%, meaning the couple needs to capture roughly 200 basis points of additional income above the risk-free rate. Reaching that level of cash flow is achievable, but it generally requires combining multiple income-producing asset classes. The practical solution pairs a tax-efficient core with higher-yield investments and a real estate component, balancing the income need against tax drag and long-term stability.

The Four-Sleeve Allocation

The portfolio splits into four sleeves, each assigned a specific job.

1. JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI), 40% of the portfolio, or roughly $640,000. This is the income engine. The covered-call strategy carries a 12-month rolling dividend yield of approximately 8%, with fund assets approaching $46 billion. Distributions float with implied volatility and have ranged from roughly 7.5% to over 9% across the past year. The 0.35% expense ratio is reasonable for an actively managed options overlay. The trade-off is familiar: upside is capped during sharp equity rallies, and payouts shrink when volatility collapses.
2. iShares Preferred and Income Securities ETF (NASDAQ:PFF), 25%, or roughly $400,000. Preferreds currently carry a trailing yield near 5.5%, and the fund is concentrated in bank and insurance issuers, with positions in JPMorgan Chase, Morgan Stanley, Bank of America, MetLife, and Allstate. Price behavior is bond-like, so rate moves matter far more than equity beta here.
3. iShares National Muni Bond ETF (NYSEARCA:MUB), 20%, or roughly $320,000. This is the MAGI shield. Municipal interest is exempt from federal income tax and does not count toward ordinary MAGI, so a trailing yield near 3.4% arrives without nudging the couple toward the IRMAA cliff.
4. Realty Income (NYSE:O | O Price Prediction), 15%, or roughly $240,000. The Monthly Dividend Company has now declared 674 consecutive monthly dividends, with the most recent distribution set at $0.2710 per share, payable in September 2026. The triple-net REIT sleeve adds property-income exposure that JEPI and PFF cannot provide.

Blended yield: roughly 6.8%. On $1.6 million that produces approximately $108,640 a year, or about $9,053 a month. The headline holds.

Why This Stays Under the IRMAA Line

The MAGI arithmetic is where the portfolio design earns its keep. The muni sleeve contributes roughly $11,800 in tax-exempt interest, which flows entirely outside of taxable MAGI. Strip that out and ordinary distributions from JEPI, PFF, and Realty Income land near $84,000. Add a typical Social Security benefit for a couple still a few years from claiming, and total MAGI sits comfortably below the $218,000 Tier 1 threshold. The cushion matters because qualified dividend treatment varies sleeve by sleeve, and JEPI’s return-of-capital portion can shift year to year, changing the taxable character of distributions without warning. One additional wrinkle: 2026 premiums are based on 2024 income, so any unexpected income spike in a lookback year can trigger surcharges two full years later, even when current income is well-managed.

The Tradeoff Most Income Investors Underweight

Reaching a 6.8% blended yield on a buy-and-hold portfolio means accepting slower principal growth than a dividend-growth strategy would provide. Consider the alternative: a pure allocation to the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD), which now holds more than $112 billion in assets at a 0.06% expense ratio and currently yields around 3.0%. On the same $1.6 million base, SCHD would generate roughly $48,000 per year, falling about $60,000 short of the income target today. The strategic difference is straightforward: the 6.8% portfolio is built for today’s check, while a SCHD-centered portfolio is built for the check a decade from now. SCHD distributions have historically grown at roughly 7% to 11% annually over the past decade, which makes the compounding case strong over longer horizons. A 64-year-old couple bridging to Social Security at 70 is buying time above all else, which is precisely what makes the high-yield blend defensible in the near term.

Three Actions Before You Build This

1. Locate the covered-call and preferred sleeves inside an IRA when possible. JEPI and PFF distributions are largely ordinary income, and sheltering them in a tax-deferred account lowers MAGI directly.
2. Model the two-year IRMAA lookback carefully. Premiums in 2026 are based on 2024 income, so any Roth conversion or capital gain realized this year will flow through to 2028 Medicare premiums.
3. Stress-test the JEPI sleeve at a 6% yield rather than 9%. Covered-call payouts fall sharply when volatility collapses. If that sleeve under-delivers, the couple needs a plan to trim spending or add a small high-yield bond fund, rather than chase yield further into riskier assets like mortgage REITs.

Editor’s note: This update refreshes MUB’s yield from near 3.7% to approximately 3.4%, reflecting current trailing yield data from BlackRock and iShares. JEPI’s assets under management have been updated to approximately $46 billion based on the most recent fund data, and SCHD’s assets under management have been updated to more than $112 billion per the Schwab asset management page as of September 30, 2026. Historical context on SCHD’s 10-year average annual dividend growth rate has also been added.

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