Wes Moss Says $1 Million in the S&P 500 Pays Just $12,000 a Year in Dividends. Here’s His Fix.
A million dollars in the S&P 500 generates far less dividend income than most retirees expect, and climbing toward higher yields introduces risks that only show up when markets turn ugly.
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Wes Moss put a hard number on a retirement problem most savers never work out. On the Clark Howard Podcast episode on September 29, 2026, he pitched a dividend “yield ladder” as an alternative to an annuity.
Moss said, “The S&P 500 yield is only about 1.2%.” “On a million dollars, you’re going to get 12 grand in dividends,” Moss noted.
“But if you go up the yield ladder: utility ETFs around 3%, big energy companies closer to 4 to 4.5%, REITs and closed-end funds in the 7 to 8% range,” Moss said.
A retiree who parks everything in an index fund like the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) receives a small dividend stream. Any dollar beyond that must come from selling shares, even in down markets.
Moss Has the Math Right, but Every Rung Carries a Price Tag
Moss is correct on the income math. Each step up the ladder increases cash flow on his million-dollar example. Here is what that looks like if Wes Moss’s yields hold:
| Rung | Yield (per Moss) | Annual income on $1 million |
|---|---|---|
| S&P 500 | 1.2% | $12,000 |
| Utility ETFs | 3% | $30,000 |
| Big energy companies | 4 to 4.5% | $40,000 to $45,000 |
| REITs and closed-end funds | 7 to 8% | $70,000 to $80,000 |
The risk mounts with every rung. Utilities are regulated monopolies selling electricity and water, so their payouts tend to be steady. Their prices still fall when interest rates rise.
Energy giants earn their dividends from oil and gas prices. When commodities collapse, payouts can be frozen or cut.
REITs are required by law to pay out most of their taxable income, which inflates their yields and leaves little buffer. Closed-end funds often borrow to boost payouts. Some distributions are returns of capital, meaning part of your “income” is your own money handed back.
Run a hypothetical stress test on the top rung. If REIT and fund payouts on $1 million fell by a quarter, $70,000 of income would shrink to $52,500.
A 30% price drop in the same example would leave $700,000 of principal. Both are plausible in a severe downturn for these asset classes.
Treasury Yields Decide Whether the Middle Rungs Are Worth It
The risk-free rate determines whether the ladder pays off. The 10-year Treasury yield stands at 5.1%. On $1 million, that’s $51,300 a year in government-backed interest.
That figure beats the energy rung’s $45,000 and the utility rung’s $30,000. At today’s rates, only the riskiest rung outpays a Treasury, and only by a few points. When the 10-year yielded far less, the ladder’s middle tiers offered a real income premium. Today, that premium buys you a dividend that can grow over time, plus the risk that it doesn’t.
How the Ladder Stacks Up Against an Annuity
Wes Moss, CERTIFIED FINANCIAL PLANNER®, is Managing Partner and Chief Investment Strategist at Capital Investment Advisors, a fee-only SEC Registered Investment Adviser with over $8.1 billion* in assets under management, and host of the Money Matters radio show and the Retire Sooner podcast. Moss, who takes listener questions at wesmoss.com/ask, lays out his retirement framework in The Retire Sooner Method. His case for the ladder rests on control.
An income annuity turns a lump sum into a guaranteed paycheck for life. In exchange, you give up access to the principal, and most fixed payments don’t mounts with inflation. The ladder keeps your principal in your name, leaves something for heirs, and lets dividends grow. It guarantees nothing.
Recent research points toward a blend. A study covered by Investopedia found that combining the 4% withdrawal rule and annuities yields the strongest retirement results.
Checks to Run Before You Climb the Yield Ladder
- Measure your income gap. Subtract Social Security and any pension from your essential monthly expenses. That gap is the only income that truly needs a guarantee.
- Price each rung against Treasuries. Compare every yield on the ladder with the current 10-year rate. Any rung paying less than a government bond has to justify itself through dividend growth.
- Read the distribution sources. For closed-end funds, check the fund’s distribution notices for return of capital before handling the yield as income.
- Stress test the top rung. Cut your REIT and closed-end fund income by a quarter on paper. If your budget breaks, that rung is too large.
- Get annuity quotes for the gap. Price an annuity that covers only your essential expenses, then let the ladder fund everything else.
The yield ladder works best when Social Security, a pension, or an annuity already covers your essential bills. Hence, a dividend cut costs you a vacation instead of your mortgage payment. The core idea, living off the checks without ever selling a share, is the whole subject of a free dividend ladder guide we put together here.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
