The Income Most Retirees Skip: How Much You Need in PFF and JAAA to Collect $4,000 a Month
Most retirees build income around dividend stocks and CDs, never realizing two overlooked fund types can quietly fill the gap between what they have and what they need each month.
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Picture a retiree whose whole income plan is a few dividend stocks and a CD at the local bank. This setup might work, but it leaves out two income sources many retirees never consider: preferred stocks and the top-rated slices of business loan pools. Here’s how a portfolio split equally between two funds that hold them can generate $4,000 a month.
Here’s the answer first. Using the past 12 months of payouts and prices pulled in early November 2026, the pair yields a blended 5%, just a hair under. You’d need about $966,000, with roughly $483,000 in each fund.
For comparison, a 10-year Treasury pays about 4.9%. Both funds pay a little extra because they carry risks a government bond doesn’t.
iShares Preferred and Income Securities ETF
iShares Preferred and Income Securities ETF (NASDAQ:PFF) holds preferred shares, mostly issued by U.S. banks and financial institutions. A preferred share sits between a bond and a stock, paying a set dividend much like a bond’s interest and getting paid before common shareholders. It rarely raises that payout, though, and its price doesn’t climb much when the company thrives.
Banks issue preferreds for a practical reason. Regulators let them count toward the capital buffer banks have to hold, and they don’t water down common shareholders the way new common stock would.
PFF trades near $28 and paid $1.46 per share over the past year. That’s a 5.1% yield. It pays monthly (we rounded up seven more monthly payers worth a look in a free report here) and charges 0.45% a year. Its half of the portfolio adds about $24,768 a year, or roughly $2,064 a month.
The one thing to know: the checks bounce around. The latest monthly payout was about 16 cents, while March’s was about 3 cents. Annualize the latest check, and you’d get a 6.7% yield, which overstates what the fund actually paid. Preferreds also tend to fall when long-term rates rise, because their fixed payouts look worse next to new, higher-paying bonds. PFF’s price has slipped about 2% over five years.
Janus Henderson AAA CLO ETF
Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) buys the AAA-rated slices of collateralized loan obligations, or CLOs. A CLO is a big pool of business loans, cut into layers. The AAA layer gets paid first, so losses have to chew through every layer below it before it takes a hit.
The fund manages about $29 billion, spread across CLOs from managers like Carlyle, Ares, and Bain Capital Credit. It trades near $51 and paid about $2.43 per share over the past year, a 4.8% yield, also monthly. Its half makes about $23,232 a year, or roughly $1,936 a month.
The one thing to know: its income floats. The underlying loans reset with short-term rates, so JAAA’s payout rises when the Federal Reserve raises and falls when it cuts. The Fed’s target rate sat at 3.75% for most of this year before moving back to 4% in September. Monthly payouts have run from about 18 to 21 cents in 2026, down from 21 to 25 cents through most of 2025.
Why This Pair Balances Out
PFF gets hurt when long-term rates climb. JAAA earns more when short-term rates climb. So a rate jump that knocks PFF’s price lower often raises JAAA’s income at the same time. That softens the blow without erasing it. Long and short rates don’t always move together, and in a credit scare both funds can drop at once.
Where This Income Belongs
In a taxable account, most of this income gets taxed at ordinary rates, since JAAA’s payouts come from loan interest, which can’t qualify for lower dividend rates. Some of PFF’s dividends can qualify for lower tax rates if they meet IRS rules. Most require a holding period of more than 60 days, while certain preferred dividends require more than 90 days. Plenty of preferred income misses that bar.
Inside a traditional IRA, dividends and interest aren’t taxed when you receive them. Withdrawals are generally taxed as ordinary income, so the tax advantage of qualified dividends doesn’t carry through when you withdraw the money.
What to Check Every Year
Hitting $4,000 a month takes about $966,000 split equally. PFF’s income tracks what banks pay on their preferreds, while long-term rates drive its price. JAAA’s income is heavily influenced by short-term interest rates and credit spreads, so Fed policy can affect its payouts.
Once a year, total each fund’s actual payouts over the past 12 months and compare them to your target. You’ll catch the gap early. If the Fed has cut and JAAA’s checks have shrunk, you still have time to add capital or trim spending.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
