The Roth IRA Mistake That Turns $5,275 a Month in Tax-Free Dividends Into a Tax Bill

Moving a Roth IRA to a new brokerage by asking the old firm to mail a check can create a tax problem. Under IRS rules, a check made out to the owner starts a deadline, and missing it can turn tax-free income into taxable income.

An income portfolio also raises the risk, as a Roth paying $5,275 a month comes to $63,300 a year, all of it tax-free while the account stays intact. Below is a six-holding Roth built for that target, with yields based on prices and annualized payouts as of November 12, 2026.

How a Mailed Check Breaks a Roth

When the old firm cuts a check in the owner’s name, that’s an indirect rollover. The money has to land back in an IRA within 60 days. If it doesn’t, IRS Publication 590-A treats it as a taxable distribution, and any deposit after the deadline counts as a regular contribution.

A second rule also applies. Publication 17 allows only one rollover from an IRA to another IRA in any 1-year period, and it groups traditional, Roth, and SIMPLE IRAs together as one account for that limit.

For a Roth owner who isn’t yet qualified (under 59½, or a Roth held for less than five years), the earnings in a non-qualified distribution can be taxed, according to Publication 590-B. Those dollars also leave the Roth’s tax shelter for good. Putting a large sum back as a regular contribution exceeds the annual limit, and the IRS charges a 6% excise tax on Roth excess contributions for each year the excess stays put.

That 6% charge is one of several IRS rules that quietly drain retirement accounts over time. Our free guide maps out nine of them here. In addition, direct trustee-to-trustee transfers aren’t limited. Per Publication 17, that includes a check the old firm makes payable to the new custodian, even if the owner delivers it (IRS Publication 17).

What $63,300 a Year Takes in a Roth

The six holdings below produce a weighted yield of about 8.3%. Dividing $63,300 by that yield calls for a Roth balance of roughly $760,000.

Nasdaq Covered Calls Drive the Biggest Payout

NEOS Nasdaq 100 High Income ETF (NASDAQ:QQQI) holds Nasdaq-100 stocks and sells call options on the index, collecting a fee called a premium. Its June filing lists short calls on the Nasdaq-100 index. It has a 20% weight, yields about 14.7% and supplies roughly 35% of the income. Selling calls caps the fund’s gains when tech stocks rally.

A Low-Cost Fund of High-Dividend U.S. Stocks

Holding high-dividend U.S. stocks for 0.38% a year, iShares Select Dividend ETF (NASDAQ:DVY) delivers about 6% of the income at a 15% weight and a 3.3% yield. Its quarterly payouts swing from $1.62 in December 2025 to $1.33 in September 2026.

Casino Rent With Room to Cover the Dividend

Gaming and Leisure Properties (NASDAQ:GLPI) is a REIT, a company that holds property and passes most of its rent to shareholders. It holds 71 facilities leased to 8 tenants. It gets a 15% weight, yields about 8.4%, and provides roughly 15% of the income. The quarterly dividend rose to $0.82 from $0.78 this year, and 2026 AFFO (a REIT cash-flow measure) guidance is $4.11 to $4.12 per share against a $3.28 annual dividend.

Monthly BDC Checks at a Premium Price

Monthly checks come from Trinity Capital (NASDAQ:TRIN), a business development company, or public lender to growth companies. It switched to monthly payouts of $0.17 in 2026. At a 15% weight and a yield of about 11.3%, it covers roughly 20% of the income. Shares near $18 trade above its $13.61 net asset value per share, with net leverage at 117% debt-to-equity.

Smoke-Free Growth Funds a Rising Dividend

Philip Morris International (NYSE:PM | PM Price Prediction) sells Marlboro alongside smoke-free products that now exceed 40% of revenue. At a 15% weight and a 3.2% yield, it adds about 6% of the income. Philip Morris raised its quarterly dividend 9% to $1.60 in October, up from its inaugural $0.46 payout in 2008.

Floating-Rate Loans That Pay Less as Rates Fall

Senior loans, first in line for repayment with floating rates, fill State Street Blackstone Senior Loan ETF (NYSEARCA:SRLN). Its payouts track short-term rates, so income falls when the Fed cuts. It takes a 20% weight, yields about 7.2%, and supplies roughly 17% of the income. The monthly payout dropped from $0.32 in February 2024 to about $0.24 now, with the Fed funds upper bound at 4%.

Protecting a $760,000 Roth During a Move

For a Roth of roughly $760,000 paying $5,275 a month, the move should start at the new brokerage as a direct transfer, and anyone already holding a rollover check is on the deadline from the day the money arrived.

However, putting it into a Roth within 60 days keeps the rollover intact, provided no other IRA rollover happened in the prior year. After the deadline, Publication 590-A lists three routes to a waiver: automatic relief, self-certification, or a private letter ruling. Starting May 1, 2027, Rev. Proc. 2026-33 establishes a new IRA correction process, while existing waiver and self-certification procedures remain available in the meantime.

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